10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-55424

______________________________________________________

KBS STRATEGIC OPPORTUNITY REIT II, INC.

(Exact Name of Registrant as Specified in Its Charter)

______________________________________________________

Maryland	46-2822978
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
800 Newport Center Drive, Suite 700 Newport Beach, California	92660
(Address of Principal Executive Offices)	(Zip Code)

(949) 417-6500

(Registrant’s Telephone Number, Including Area Code)

______________________________________________________________________ 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  xNo  ¨

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

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨  No  x

As of November 9, 2017, there were 16,542,777 and 10,839,223 outstanding shares of Class A and Class T common stock, respectively, of KBS Strategic Opportunity REIT II, Inc.

KBS Strategic Opportunity REIT II, Inc.

FORM 10-Q

September 30, 2017

INDEX

PART I.	FINANCIAL INFORMATION		2
	Item 1.	Financial Statements	2
		Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	2
		Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	3
		Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016	4
		Consolidated Statements of Equity for the Year Ended December 31, 2016 and the Nine Months Ended September 30, 2017 (unaudited)	5
		Consolidated Statement of Cash Flows (unaudited) for the Nine Months Ended September 30, 2017 and 2016	6
		Condensed Notes to Consolidated Financial Statements as of September 30, 2017 (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
	Item 4.	Controls and Procedures	50
PART II.	OTHER INFORMATION		51
	Item 1.	Legal Proceedings	51
	Item 1A.	Risk Factors	51
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 3.	Defaults upon Senior Securities	56
	Item 4.	Mine Safety Disclosures	56
	Item 5.	Other Information	56
	Item 6.	Exhibits	57
SIGNATURES			59

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30, 2017			December 31, 2016
	(unaudited)
Assets
Real estate, net	$	498,708		$	317,323
Real estate loan receivable, net	3,500			3,442
Total real estate and real estate-related investments, net	502,208			320,765
Cash and cash equivalents	36,867			43,741
Restricted cash	10,740			3,385
Investment in unconsolidated entity	2,658			2,385
Rents and other receivables	2,184			2,388
Above-market leases, net	16			21
Prepaid expenses and other assets	5,589			10,529
Total assets	$	560,262		$	383,214
Liabilities and equity
Notes payable, net	$	305,878		$	208,581
Accounts payable and accrued liabilities	8,257			7,101
Due to affiliates	5,963			812
Distributions payable	341			274
Below-market leases, net	11,842			949
Other liabilities	11,426			3,408
Total liabilities	343,707			221,125
Commitments and contingencies (Note 12)
Redeemable common stock	3,208			2,121
Equity
KBS Strategic Opportunity REIT II, Inc. stockholders’ equity
Preferred stock, $.01 par value per share; 10,000,000 shares authorized, no shares issued and outstanding	—			—
Class A common stock, $.01 par value per share; 500,000,000 shares authorized, 16,296,767 and 14,074,793 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	163			140
Class T common stock, $.01 par value per share; 500,000,000 shares authorized, 10,624,216 and 6,046,591 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	106			61
Additional paid-in capital	235,498			176,021
Cumulative distributions and net losses	(34,913		)	(27,817		)
Accumulated other comprehensive income (loss)	162			(111		)
Total KBS Strategic Opportunity REIT II, Inc. stockholders’ equity	201,016			148,294
Noncontrolling interests	12,331			11,674
Total equity	213,347			159,968
Total liabilities and equity	$	560,262		$	383,214

See accompanying condensed notes to consolidated financial statements.

2

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Hotel revenues	$	12,160		$	8,599		$	23,473		$	20,563
Office revenues	4,218			1,892			7,824			3,289
Apartment revenues	1,746			—			5,184			—
Interest income from real estate loans receivable	103			101			303			298
Total revenues	18,227			10,592			36,784			24,150
Expenses:
Hotel expenses	5,807			5,157			14,839			13,466
Office expenses	1,536			521			2,713			860
Apartment expenses	1,026			—			2,724			—
Asset management fees to affiliate	739			359			1,820			908
Real estate acquisition fees and expenses to affiliate	—			—			—			1,341
Real estate acquisition fees and expenses	—			—			—			123
General and administrative expenses	1,146			646			2,492			2,073
Depreciation and amortization	3,709			2,314			9,176			5,299
Interest expense	2,255			931			5,798			2,379
Total expenses	16,218			9,928			39,562			26,449
Other income:
Other interest income	178			75			467			132
Equity in income of unconsolidated entity	14			58			40			58
Casualty-related income	1,614			—			1,614			—
Total other income	1,806			133			2,121			190
Net income (loss) before income taxes	3,815			797			(657		)	(2,109		)
Income tax (expense) benefit	(431		)	(48		)	5			(33		)
Net income (loss)	3,384			749			(652		)	(2,142		)
Net income attributable to noncontrolling interests	(491		)	(148		)	(182		)	(160		)
Net income (loss) attributable to common stockholders	$	2,893		$	601		$	(834	)	$	(2,302	)
Class A Common Stock:
Net income (loss) attributable to common stockholders	$	1,905		$	499		$	(126	)	$	(2,188	)
Net income (loss) per common share, basic and diluted	$	0.12		$	0.04		$	(0.01	)	$	(0.18	)
Weighted-average number of common shares outstanding, basic and diluted	16,166,468			13,219,633			15,410,820			12,357,932
Class T Common Stock:
Net income (loss) attributable to common stockholders	$	988		$	102		$	(708	)	$	(114	)
Net income (loss) per common share, basic and diluted	$	0.09		$	0.04		$	(0.08	)	$	(0.10	)
Weighted-average number of common shares outstanding, basic and diluted	10,482,688			2,538,705			9,107,916			1,109,835

See accompanying condensed notes to consolidated financial statements.

3

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	3,384		$	749		$	(652	)	$	(2,142	)
Other comprehensive income:
Foreign currency translation gain	82			27			273			40
Total other comprehensive income	82			27			273			40
Total comprehensive income (loss)	3,466			776			(379		)	(2,102		)
Total comprehensive income attributable to noncontrolling interests	(491		)	(148		)	(182		)	(160		)
Total comprehensive income (loss) attributable to common stockholders	$	2,975		$	628		$	(561	)	$	(2,262	)

See accompanying condensed notes to consolidated financial statements.

4

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF EQUITY

For the Year Ended December 31, 2016 and the Nine Months Ended September 30, 2017

(unaudited)

(dollars in thousands)

	Common Stock										Additional Paid-in Capital			Cumulative Distributions and Net Losses			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Class A					Class T
	Shares		Amounts			Shares		Amounts
Balance, December 31, 2015	9,619,143		$	96		—		$	—		$	79,622		$	(13,266	)	$	—		$	66,452		$	4,290		$	70,742
Net loss	—		—			—		—			—			(6,490		)	—			(6,490		)	(5		)	(6,495		)
Other comprehensive loss	—		—			—		—			—			—			(111		)	(111		)	—			(111		)
Issuance of common stock	4,104,345		41			5,955,697		60			97,308			—			—			97,409			—			97,409
Stock distribution declared	422,829		4			90,894		1			5,095			(5,100		)	—			—			—			—
Redemptions of common stock	(71,524	)	(1		)	—		—			(590		)	—			—			(591		)	—			(591		)
Transfers to redeemable common stock	—		—			—		—			(1,029		)	—			—			(1,029		)	—			(1,029		)
Distributions declared	—		—			—		—			—			(2,961		)	—			(2,961		)	—			(2,961		)
Commissions on stock sales, dealer manager fees and stockholder servicing fees to affiliate	—		—			—		—			(6,213		)	—			—			(6,213		)	—			(6,213		)
Reduction of other offering costs	—		—			—		—			1,828			—			—			1,828			—			1,828
Noncontrolling interests contributions	—		—			—		—			—			—			—			—			7,389			7,389
Balance, December 31, 2016	14,074,793		$	140		6,046,591		$	61		$	176,021		$	(27,817	)	$	(111	)	$	148,294		$	11,674		$	159,968
Net (loss) income	—		—			—		—			—			(834		)	—			(834		)	182			(652		)
Other comprehensive income	—		—			—		—			—			—			273			273			—			273
Issuance of common stock	2,062,259		21			4,452,107		45			62,617			—			—			62,683			—			62,683
Stock distribution declared	226,399		3			130,816		1			3,411			(3,415		)	—			—			—			—
Redemptions of common stock	(66,684	)	(1		)	(5,298	)	(1		)	(632		)	—			—			(634		)	—			(634		)
Transfers to redeemable common stock	—		—			—		—			(1,087		)	—			—			(1,087		)	—			(1,087		)
Distributions declared	—		—			—		—			—			(2,847		)	—			(2,847		)	—			(2,847		)
Commissions on stock sales, dealer manager fees and stockholder servicing fees to affiliate	—		—			—		—			(4,249		)	—			—			(4,249		)	—			(4,249		)
Other offering costs	—		—			—		—			(583		)	—			—			(583		)	—			(583		)
Noncontrolling interests contributions	—		—			—		—			—			—			—			—			500			500
Distributions to noncontrolling interests	—		—			—		—			—			—			—			—			(25		)	(25		)
Balance, September 30, 2017	16,296,767		$	163		10,624,216		$	106		$	235,498		$	(34,913	)	$	162		$	201,016		$	12,331		$	213,347

See accompanying condensed notes to consolidated financial statements.

5

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2017 and 2016

(unaudited)

(in thousands)

	For the Nine Months Ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net loss	$	(652	)	$	(2,142	)
Adjustment to reconcile net loss to net cash provided by operating activities
Equity in income of unconsolidated entity	(40		)	(58		)
Distribution of earnings from unconsolidated joint venture	40			—
Casualty-related income	(1,614		)	—
Depreciation and amortization	9,176			5,299
Noncash interest income on real estate-related investment	(58		)	(52		)
Deferred rents	(319		)	(172		)
Bad debt expense	425			—
Amortization of above- and below-market leases, net	(974		)	(285		)
Amortization of deferred financing costs	612			384
Unrealized loss on derivative instruments	117			43
Changes in operating assets and liabilities:
Rents and other receivables	(499		)	(1,737		)
Prepaid expenses and other assets	2,444			(845		)
Accounts payable and accrued liabilities	509			1,594
Due to affiliates	23			(10		)
Other liabilities	1,176			2,213
Net cash provided by operating activities	10,366			4,232
Cash Flows from Investing Activities:
Acquisition of real estate	(154,719		)	(51,341		)
Improvements to real estate	(7,830		)	(14,298		)
Investment in unconsolidated entity	—			(2,486		)
Payments for construction in progress	(4,103		)	—
Escrow deposits for future real estate purchases	(1,000		)	(3,000		)
Proceeds from insurance claim	5,080			—
Net cash used in investing activities	(162,572		)	(71,125		)
Cash Flows from Financing Activities:
Proceeds from notes payable	97,374			45,500
Payments of deferred financing costs	(1,225		)	(492		)
Proceeds from issuance of common stock	61,559			69,735
Payments to redeem common stock	(634		)	(40		)
Payments of commissions on stock sales, dealer manager fees and stockholder servicing fees	(3,803		)	(4,303		)
Payments of other offering costs	—			(20		)
Distributions paid	(1,059		)	(434		)
Noncontrolling interest contributions	500			515
Distributions to noncontrolling interest	(25		)	—
Net cash provided by financing activities	152,687			110,461
Net increase in cash, cash equivalents and restricted cash	481			43,568
Cash, cash equivalents and restricted cash, beginning of period	47,126			25,366
Cash, cash equivalents and restricted cash, end of period	$	47,607		$	68,934
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $2,985 and $126 for the nine months ended September 30, 2017 and 2016, respectively	$	4,062		$	1,788
Supplemental Disclosure of Noncash Investing and Financing Activities:
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan	$	1,721		$	664
Increase in accrued improvements to real estate	$	134		$	—
Increase in other offering costs due to affiliates	$	583		$	157
Increase in acquisition fees due to affiliates	$	4,099		$	166
Reversal of accrued organization and offering expenses due to affiliates	$	—		$	(2,222	)
Increase in stockholder servicing fees due to affiliate	$	—		$	1,474
Stock dividends issued	$	3,415		$	1,685
Increase in distributions payable	$	67		$	1,078
Foreign currency translation gain on investment in unconsolidated entity	$	273		$	40
Increase in construction in progress payable	$	403		$	—

See accompanying condensed notes to consolidated financial statements.

6

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017

(unaudited)

1. ORGANIZATION

KBS Strategic Opportunity REIT II, Inc. (the “Company”) was formed on February 6, 2013 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2014 and intends to continue to operate in such a manner. The Company’s business is conducted through KBS Strategic Opportunity Limited Partnership II (the “Operating Partnership”), a Delaware limited partnership formed on February 7, 2013. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Strategic Opportunity Holdings II LLC (“REIT Holdings”), a Delaware limited liability company formed on February 7, 2013, owns the remaining 99.9% partnership interest in the Operating Partnership and is the sole limited partner. The Company is the sole member and manager of REIT Holdings. The Company has three wholly owned taxable REIT subsidiaries (“TRS”), two of which lease the Company’s hotel properties and in turn contract with independent hotel management companies that manage the day-to-day operations of the Company’s hotels; the third consolidates the Company’s wholly owned TRSs.  The Company’s TRSs are subject to federal and state income tax at regular corporate tax rates.

Subject to certain restrictions and limitations, the business of the Company has been externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, since July 2013 pursuant to an advisory agreement (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of real estate loans, opportunistic real estate, and other real estate-related investments. The Advisor has entered into a sub-advisory agreement with STAM, a real estate operating company to provide real estate acquisition and portfolio management services to the Advisor in connection with any investments the Company may make in value-added real estate, distressed debt, and real estate-related investments in Europe. On July 3, 2013, the Company issued 21,739 shares of its common stock to the Advisor at a purchase price of $9.20 per share.

The Company expects to invest in and manage a diverse portfolio of opportunistic real estate, real estate-related loans, real estate-related debt securities and other real estate-related investments located in the United States and Europe. Such investments may include the acquisition of distressed debt, the origination and acquisition of mortgage, mezzanine, bridge and other real estate-related loans, investment in opportunistic real estate and investments in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. The Company may also invest in entities that make similar investments. As of September 30, 2017, the Company had invested in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity and one first mortgage loan. Additionally as of September 30, 2017, the Company had entered into a joint venture to develop one retail property, which is currently under construction.

From July 3, 2013 to August 11, 2014, the Company conducted a private placement offering (the “Private Offering”) exempt from registration under Regulation D of the Securities Act of 1933, as amended (the “Act”). The Company sold 3,619,851 shares of common stock for gross offering proceeds of $32.2 million in the Private Offering.

On November 14, 2013, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 180,000,000 shares of common stock for sale to the public (the “Public Offering”), of which 100,000,000 shares were registered in a primary offering and 80,000,000 shares were registered to be sold under the Company’s dividend reinvestment plan. The SEC declared the Company’s registration statement effective on August 12, 2014. On February 11, 2016, the Company filed an amended registration statement on Form S-11 with the SEC to offer a second class of common stock designated as Class T shares and to designate its initially offered and outstanding common stock as Class A shares. Pursuant to the amended registration statement, the Company is offering to sell any combination of Class A and Class T shares in the Public Offering but in no event may the Company sell more than 180,000,000 of shares of its common stock pursuant to the Public Offering. The Company commenced offering Class T shares of common stock for sale to the public on February 17, 2016. KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, serves as the dealer manager of the Public Offering pursuant to a dealer manager agreement originally dated August 12, 2014 and amended and restated February 17, 2016 (the “Dealer Manager Agreement”). Previously the Dealer Manager served as dealer manager for the Private Offering. The Dealer Manager is responsible for marketing the Company’s shares.

7

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

The Company’s board of directors has extended the closing date of the primary offering until the earlier of the sale of up to $650.0 million of shares, or the date the registration statement relating to the Company’s proposed follow-on offering (the “Follow-on Offering”) is declared effective by the SEC.

On August 10, 2017, the Company filed a registration statement on Form S-11 with the SEC to register the Follow-on Offering. Pursuant to the Follow-on Offering registration statement, the Company proposes to register up to $500.0 million of shares of common stock for sale to the public in the primary portion of the Follow-on Offering. The Company also expects to register up to $125.0 million of shares of common stock pursuant to the Company’s dividend reinvestment plan in the Follow-on Offering. The Company can give no assurance that it will commence or complete the Follow-on Offering.

On January 7, 2015, the Company broke escrow in the Public Offering and through September 30, 2017, the Company had sold 10,912,156 and 10,407,804 shares of Class A and Class T common stock, respectively, in the Public Offering for aggregate gross offering proceeds of $207.1 million, including 342,508 and 78,227 shares of Class A and Class T common stock, respectively, under its dividend reinvestment plan for aggregate gross offering proceeds of $3.9 million. Also as of September 30, 2017, the Company had redeemed 138,208 and 5,298 shares of Class A and Class T common stock, respectively, for $1.2 million.

On each of April 2, 2014 and July 31, 2014, the Company issued 120,106 shares of Class A common stock to Willowbrook Capital Group LLC, an entity owned and controlled by Keith D. Hall, one of the Company’s directors and the Company’s Chief Executive Officer, and Peter McMillan III, also one of the Company’s directors and the Company’s President, for $1.0 million. On July 14, 2017, the Company issued 214,175 shares of Class A common stock to a business associate of Keith D. Hall and Peter McMillan III for $2.0 million. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016, except for the adoption of ASU No. 2017-01 on January 1, 2017. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the SEC.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries and joint ventures in which the Company has a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

8

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation.  These reclassifications have not changed the results of operations of prior periods. During the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

Segments

The Company has invested in opportunistic real estate investments and originated a loan secured by a non-stabilized real estate asset. In general, the Company intends to hold its investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, the Company’s management views opportunistic real estate and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate and other real estate-related assets, and therefore, the Company currently aggregates its operating segments into one reportable business segment. In addition, the Company has invested in a participating loan facility secured by a portfolio of light industrial properties located in Europe. However, based on the Company's investment portfolio and future investment focus, the Company does not believe that its investment in the European asset is a reportable segment.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding for each class of share outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2017 and 2016. For the purpose of determining the weighted-average number of shares outstanding, stock dividends issued are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

The Company’s board of directors has declared and issued stock dividends on shares of the Company’s common stock during the three and nine months ended September 30, 2017 and 2016 as follows:

Three Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.005001 shares	71,656
2017	0.005001 shares	131,477

Nine Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.015002 shares	168,866
2017	0.015003 shares	357,215

_____________________

⁽¹⁾ Amount declared per share outstanding includes one-time stock dividends, quarterly dividends and monthly dividends and assumes each share was issued and outstanding for the entire periods presented. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend.

9

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Until the Company established an estimated net asset value, on June 6, 2017, per share of common stock, for the purpose of calculating the dollar amount of the Class A and Class T stock dividends issued, the Company used the current Class A and Class T primary offering price.

Cash distributions declared per share of Class A common stock were $0.048 and $0.143 for the three and nine months ended September 30, 2017, respectively. Cash distributions declared per share of Class T common stock were $0.025 and $0.073 for the three and nine months ended September 30, 2017, respectively. The declared rate of cash distributions for Class T Shares is different than the rate declared for the Class A Shares by an amount equivalent to any applicable daily stockholder servicing fees. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date during the three and nine months ended September 30, 2017. Each day during the period from January 1, 2017 through September 30, 2017 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period 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.

Cash distributions declared per share of Class A common stock were $0.098 and $0.154 for the three and nine months ended September 30, 2016, respectively. Cash distributions declared per share of Class T common stock were $0.074 and $0.098 for the three and nine months ended September 30, 2016. The declared rate of cash distributions for Class T Shares is different than the rate declared for the Class A Shares by an amount equivalent to any applicable daily stockholder servicing fees. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date during the three and nine months ended September 30, 2016. Each day during the period from March 1, 2016 through March 31, 2016 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period at a rate of (i) $0.00026202 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. Each day during the period from April 1, 2016 through September 30, 2016 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period 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. Given the distribution rate declared for the period and the applicable 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 1, 2016 to March 31, 2016. On September 27, 2016, the Company’s 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 common stock to stockholders of record as of the close of business on September 27, 2016.

10

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common stock during the periods presented.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Net income (loss) attributable to common stockholders	$	2,893	$	601		$	(834	)	$	(2,302	)
Less: Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Less: Class T Common Stock cash distributions declared	258		249			660			254
Undistributed net income (loss) attributable to common stockholders	$	1,858	$	(912	)	$	(3,681	)	$	(4,478	)
Class A Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	1,128	$	(765	)	$	(2,313	)	$	(4,110	)
Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Net income (loss) attributable to Class A common stockholders	$	1,905	$	499		$	(126	)	$	(2,188	)
Net income (loss) per common share, basic and diluted	$	0.12	$	0.04		$	(0.01	)	$	(0.18	)
Weighted-average number of common shares outstanding, basic and diluted	16,166,468		13,219,633			15,410,820			12,357,932
Class T Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	730	$	(147	)	$	(1,368	)	$	(368	)
Class T Common Stock cash distributions declared	258		249			660			254
Net income (loss) attributable to Class T common stockholders	$	988	$	102		$	(708	)	$	(114	)
Net income (loss) per common share, basic and diluted	$	0.09	$	0.04		$	(0.08	)	$	(0.10	)
Weighted-average number of common shares outstanding, basic and diluted	10,482,688		2,538,705			9,107,916			1,109,835

Square Footage, Occupancy and Other Measures

 Any references to square footage, occupancy or annualized base rent are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

11

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Recently Issued Accounting Standards Updates

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The Company is in the process of identifying the Company’s revenue streams that are impacted by the adoption of ASC 606. The Company has preliminarily identified revenues that may be impacted by this standard, which includes hotel revenues (comprised of room, food, beverage, convention services, and miscellaneous revenues), and other ancillary income earned at its properties. The Company’s revenues generated through leasing arrangements are excluded from this standard. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

12

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.   ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); and (d) Relating to distributions received from equity method investments, ASU No. 2016-15 provides an accounting policy election for classifying distributions received from equity method investments. Such amounts can be classified using a (1) cumulative earnings approach, or (2) nature of distribution approach. Under the cumulative earnings approach, an investor would compare the distributions received to its cumulative equity method earnings since inception.  Any distributions received up to the amount of cumulative equity earnings would be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Alternatively, an investor can choose to classify the distributions based on the nature of activities of the investee that generated the distribution. If the necessary information is subsequently not available for an investee to determine the nature of the activities, the entity should use the cumulative earnings approach for that investee and report a change in accounting principle on a retrospective basis; (e) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

13

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected to early adopt ASU No. 2016-18 for the reporting period ending December 31, 2016 and was applied retrospectively. As a result of adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”) to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  ASU No. 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.  If the screen is not met, ASU No. 2017-01 (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements.  ASU No. 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs.  Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.  ASU No. 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The amendments can be applied to transactions occurring before the guidance was issued (January 5, 2017) as long as the applicable financial statements have not been issued.  The Company elected to early adopt ASU No. 2017-01 for the reporting period beginning January 1, 2017.  As a result of adoption of ASU No. 2017-01, the Company’s acquisitions of investment properties beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations).  Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.

3. RECENT ACQUISITION OF REAL ESTATE

During the nine months ended September 30, 2017, the Company acquired the following property (in thousands):

								Intangibles
Property Name	City	State	Acquisition Date	Land		Building and Improvements		Tenant Origination  and Absorption Costs		Above-Market Lease Assets		Below-Market Lease Liabilities			Total Purchase Price
Oakland City Center	Oakland	CA	08/18/2017	$	22,150	$	136,544	$	11,951	$	—	$	(11,872	)	$	158,773

The intangible assets and liabilities acquired in connection with this acquisition have weighted-average amortization periods as of the date of acquisition as follows (in years):

	Tenant Origination and Absorption Costs	Above-Market Lease Assets	Below-Market Lease Liabilities
Oakland City Center	4.8	—	4.7

The Company recorded this acquisition as an asset acquisition. Included in the total purchase price above was $5.5 million of capitalized acquisition costs. For the nine months ended September 30, 2017, the Company recognized $2.4 million of total revenues and $1.2 million of operating expenses from this property.

14

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

4. REAL ESTATE

As of September 30, 2017, the Company’s real estate portfolio was composed of two hotel properties, three office properties and one apartment building. In addition, the Company has entered into a joint venture to develop one retail property, which is currently under construction. The following table summarizes the Company’s real estate as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017			December 31, 2016
Land	$	93,598		$	71,448
Buildings and improvements	340,391			196,050
Construction in progress	62,246			50,452
Tenant origination and absorption costs	16,471			6,226
Total real estate, cost	512,706			324,176
Accumulated depreciation and amortization	(13,998		)	(6,853		)
Total real estate, net	$	498,708		$	317,323

The following table provides summary information regarding the Company’s real estate as of September 30, 2017 (in thousands):

Property	Date Acquired	City	State	Property Type	Land		Building and Improvements(1)		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net		Ownership %
Springmaid Beach Resort	12/30/2014	Myrtle Beach	SC	Hotel	$	27,438	$	30,821	$	—	$	58,259	$	(3,617	)	$	54,642	90.0%
Q&C Hotel	12/17/2015	New Orleans	LA	Hotel	1,232		52,921		—		54,153		(3,301		)	50,852		90.0%
2200 Paseo Verde	12/23/2015	Henderson	NV	Office	1,850		11,412		603		13,865		(957		)	12,908		100.0%
Lincoln Court	05/20/2016	Campbell	CA	Office	14,706		33,711		3,917		52,334		(3,221		)	49,113		100.0%
Lofts at NoHo Commons	11/16/2016	North Hollywood	CA	Apartment	26,222		74,902		—		101,124		(1,648		)	99,476		90.0%
210 West 31st Street (2)	12/01/2016	New York	NY	Retail	—		62,246		—		62,246		—			62,246		80.0%
Oakland City Center	08/18/2017	Oakland	CA	Office	22,150		136,624		11,951		170,725		(1,254		)	169,471		100.0%
					$	93,598	$	402,637	$	16,471	$	512,706	$	(13,998	)	$	498,708

_____________________

⁽¹⁾ Building and improvements includes construction in progress.

⁽²⁾ The Company acquired the rights to a leasehold interest with respect to this property. The leasehold interest expires January 31, 2114. As of September 30, 2017, the capital lease had a carrying value of $7.1 million included in construction in progress.

15

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Hotel Properties

As of September 30, 2017, the Company owned two hotel properties. The following table provides detail information regarding the Company's hotel revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Hotel revenues:
Room	$	4,973	6,499		$	13,304	15,180
Food, beverage and convention services	1,031		883		2,785		2,436
Campground	288		275		838		806
Other (1)	5,868		942		6,546		2,141
Hotel revenues	$	12,160	$	8,599	$	23,473	$	20,563
Hotel expenses:
Room	$	1,391	1,500		$	3,604	3,787
Food, beverage and convention services	868		842		2,381		2,188
General and administrative	601		590		1,748		1,696
Sales and marketing	690		453		2,058		1,236
Repairs and maintenance	454		485		1,350		1,345
Utilities	325		324		777		767
Property taxes and insurance	867		348		1,650		1,050
Other	611		615		1,271		1,397
Hotel expenses	$	5,807	$	5,157	$	14,839	$	13,466

_____________________

⁽¹⁾ Hotel revenues - other includes $5.5 million and $5.8 million of business interruption insurance recovery for the three and nine months ended September 30, 2017, respectively.

Springmaid Beach Resort

Springmaid Beach Resort sustained significant damage from Hurricane Matthew in October 2016, which resulted in a number of rooms being offline through September 30, 2017. The pier was destroyed and certain restaurants and stores have been closed. The Company’s insurance policy provides coverage for property damage and business interruption subject to a deductible of up to 3% of replacement cost per incident. Based on management’s estimates, the Company recognized an estimated aggregate loss for the damaged assets' net book value of $3.7 million during the year ended December 31, 2016, which was reduced by $3.7 million of estimated insurance recovery since the Company determined that it was probable of receipt. While the Company's insurance recovery is subject to a deductible, the Company did not recognize a loss as the estimated insurance recovery based on fair value (or replacement cost) exceeds the net book value of the damaged assets plus the deductible amount, which is estimated to be approximately $2.5 million.

As of December 31, 2016, the Company recorded a receivable of $6.2 million for estimated insurance recoveries as prepaid expenses and other assets on the accompanying consolidated balance sheets related to the damages mentioned above. In September 2017, the Company reached a final settlement with the insurance company. The Company received $8.2 million for the property damages sustained as a result of Hurricane Matthew during the nine months ended September 30, 2017. During the three and nine months ended September 30, 2017, the Company received $5.5 million and $5.8 million of business interruption insurance recovery, respectively, which is included in hotel revenues on the accompanying consolidated statements of operations. As a result of the settlement, the Company recorded a $1.6 million gain for casualty-related income, net on the accompanying consolidated statements of operations.

16

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

To the extent that insurance proceeds ultimately exceeded the difference between replacement cost and net book value of the impaired assets, the post-hurricane costs incurred, and/or business interruption losses recognized, the excess was reflected as income in the period those amounts were received or when receipt was deemed probable to occur.

Office Properties

As of September 30, 2017, the Company owned three office properties encompassing in the aggregate 551,380 rentable square feet which were 90% occupied. The following table provides detailed information regarding the Company's office revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Office revenues:
Rental income	$	3,983	$	1,817	$	7,406	$	3,165
Tenant reimbursements and other income	235		75		418		124
Office revenues	$	4,218	$	1,892	$	7,824	$	3,289
Office expenses:
Operating, maintenance, and management	$	1,094	$	328	$	1,890	$	552
Real estate taxes and insurance	442		193		823		308
Office expenses	$	1,536	$	521	$	2,713	$	860

Operating Leases

The Company’s office properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2017, the leases had remaining terms, excluding options to extend, of up to 10.9 years with a weighted-average remaining term of 3.5 years. Some of the leases may have provisions to extend the term of the lease, options for early termination for all or a part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to office tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $1.0 million and $0.7 million as of September 30, 2017 and December 31, 2016, respectively.

As of September 30, 2017, the future minimum rental income from the Company’s office properties under its non-cancelable operating leases was as follows (in thousands):

October 1, 2017 through December 31, 2017	$	4,607
2018	17,512
2019	15,577
2020	12,193
2021	9,383
Thereafter	19,912
	$	79,184

17

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Apartment Property

As of September 30, 2017, the Company owned one apartment property with 292 units which was 94% occupied. The following table provides detailed information regarding the Company's apartment revenues and expenses for the three and nine months ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Apartment revenues:
Rental income	$	1,638	$	4,856
Tenant reimbursements and other income	108		328
Apartment revenues	$	1,746	$	5,184
Apartment expenses:
Operating, maintenance, and management	$	683	$	1,704
Real estate taxes and insurance	343		1,020
Apartment expenses	$	1,026	$	2,724

5. TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of September 30, 2017 and December 31, 2016, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Cost	$	16,471		$	6,226		$	27		$	27		$	(13,081	)	$	(1,445	)
Accumulated Amortization	(2,424		)	(1,553		)	(11		)	(6		)	1,239			496
Net Amount	$	14,047		$	4,673		$	16		$	21		$	(11,842	)	$	(949	)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended September 30,						For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(865	)	$	(627	)	$	(2	)	$	(3	)	$	647	$	200

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(2,578	)	$	(1,055	)	$	(5	)	$	(15	)	$	979	$	300

18

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Additionally, as of September 30, 2017 and December 31, 2016, the Company had recorded unamortized housing subsidy intangible asset which is included in prepaid expenses and other assets in the accompanying balance sheets, of $2.5 million, which is amortized on a straight line basis over 31.8 years. During the three and nine months ended September 30, 2017, the Company recorded amortization expense of $20,000 and $60,000, respectively, related to the housing subsidy intangible asset.

6. REAL ESTATE LOAN RECEIVABLE

As of September 30, 2017 and December 31, 2016, the Company had originated one real estate loan receivable as follows (in thousands):

Loan Name Location of Related Property or Collateral

Date Originated

Property Type

Loan Type

Outstanding Principal Balance as of September 30, 2017

Book Value as of September 30, 2017 (1)

Book Value as of December 31, 2016 (1)

Contractual Interest Rate (2)

Annualized Effective Interest Rate (2)

Maturity Date

655 Summer Street First Mortgage

Boston, Massachusetts

09/04/2014

Office

Mortgage

$

3,500

$

3,500

$

3,442

9.25%

11.68%

10/01/2017 (3)

_____________________

⁽¹⁾ Book value of the real estate loan receivable represents outstanding principal balance adjusted for unamortized origination fees and direct origination and acquisition costs.

⁽²⁾ 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 2017, using the interest method annualized (if applicable) and 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, 2017.

⁽³⁾ Subsequent to September 30, 2017, the maturity date of the 655 Summer Street First Mortgage was extended to January 1, 2018.

The following summarizes the activity related to the real estate loan receivable for the nine months ended September 30, 2017 (in thousands):

Real estate loan receivable - December 31, 2016	$	3,442
Amortization of closing costs and origination fees on real estate loan receivable	58
Real estate loan receivable - September 30, 2017	$	3,500

For the three and nine months ended September 30, 2017 and 2016, interest income from the real estate loan receivable consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Contractual interest income	$	83	$	83	$	245	$	246
Amortization of closing costs and origination fees, net	20		18		58		52
Interest income from real estate loan receivable	$	103	$	101	$	303	$	298

19

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

7. INVESTMENT IN UNCONSOLIDATED ENTITY

On June 28, 2016, the Company originated a participating loan facility in an amount up to €2.6 million ($2.9 million at closing). The Company funded approximately €2.1 million ($2.3 million at closing). The proceeds were used by STAM 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, the Company participates 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, the Company also capitalized an additional $0.2 million of acquisition costs and fees. During the three and nine months ended September 30, 2017, the Company recognized $14,000 and $40,000, respectively, of income with respect to this investment. During the three and nine months ended September 30, 2016, the Company recognized $58,000 of income with respect to this investment.

8. NOTES PAYABLE

As of September 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (in thousands):

	Book Value as of September 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate (1)	Effective Interest Rate (1)	Payment Type	Maturity Date
Springmaid Beach Resort Mortgage Loan	$	38,000		$	38,000		One-month LIBOR + 3.00%	4.24%	Interest Only	12/30/2017
Q&C Hotel Mortgage Loan	28,330			28,330			One-month LIBOR + 3.25%	4.49%	Interest Only(2)	12/17/2018
2200 Paseo Verde Mortgage Loan(3)	7,947			7,430			One-month LIBOR + 2.25%	3.49%	Interest Only(3)	07/01/2020
Lincoln Court Mortgage Loan	33,500			33,500			One-month LIBOR + 1.75%	2.99%	Interest Only	06/01/2020
Lofts at NoHo Commons Mortgage Loan	72,100			72,100			One-month LIBOR + 2.66%	3.89%	Interest Only	12/01/2019
210 West 31st Street Mortgage Loan(4)	35,007			32,650			One-month LIBOR + 5.50%	6.74%	Interest Only	12/01/2019
Oakland City Center Mortgage Loan(5)	94,500			—			One-month LIBOR + 1.75%	2.99%	Interest Only(5)	09/01/2022
Total notes payable principal outstanding	309,384			212,010
Deferred financing costs, net	(3,506		)	(3,429		)
Total notes payable, net	$	305,878		$	208,581

_____________________

⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2017. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2017 (consisting of the contractual interest rate, contractual floor rates and the effects of interest rate caps, if applicable), using interest rate indices at September 30, 2017, where applicable.

⁽²⁾ Beginning 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.

⁽³⁾ As of September 30, 2017, $7.9 million had been disbursed to the Company and up to $1.6 million is available for future disbursements to be used for tenant improvement costs, capital improvements costs and leasing commissions, subject to certain terms and conditions contained in the loan documents. Beginning August 1, 2019, monthly payments include principal amortization payments of $10,000 per month.

⁽⁴⁾ As of September 30, 2017, $35.0 million had been disbursed to the Company and up to $12.1 million is 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.

⁽⁵⁾ See “Recent Financing Transaction – Oakland City Center Mortgage Loan.”

20

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

During the three and nine months ended September 30, 2017, the Company incurred $2.3 million and $5.8 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2017 was $0.4 million and $1.1 million, respectively, of amortization of deferred financing costs. Interest expense incurred as a result of the Company’s interest rate cap agreement was $12,000 and $84,000 for the three and nine months ended September 30, 2017, respectively. Additionally, during the three and nine months ended September 30, 2017, the Company capitalized $1.3 million and $3.0 million, respectively, of interest related to its redevelopment project at 210 West 31st Street. During the three and nine months ended September 30, 2016, the Company incurred $0.9 million and $2.4 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2016 was $0.1 million and $0.4 million, respectively, of amortization of deferred financing costs. Interest expense incurred as a result of the Company’s interest rate cap agreement was $1,000 and $43,000 for the three and nine months ended September 30, 2016, respectively. Additionally, during the three and nine months ended September 30, 2016, the Company capitalized $54,000 and $126,000, respectively, of interest related to its redevelopment projects at Springmaid Beach Resort. As of September 30, 2017 the Company’s deferred financing costs were $3.6 million, of which $3.5 million, net of amortization, was included in notes payable, net and $0.1 million was included in prepaid and other assets on the accompanying balance sheets. As of December 31, 2016, the Company’s deferred financing costs were $3.4 million, net of amortization, and are included in notes payable, net on the accompanying consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the Company’s interest payable was $1.0 million and $0.7 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2017 (in thousands):

October 1, 2017 through December 31, 2017	$	38,000
2018	28,330
2019	107,157
2020	41,727
2021	1,320
Thereafter	92,850
	$	309,384

The Company’s notes payable contain financial and non-financial debt covenants. As of September 30, 2017, the Company was in compliance with all debt covenants.

The Company’s note payable with respect to the Springmaid Beach Resort Mortgage Loan requires the Company to maintain a minimum working capital reserve in an amount sufficient to fund the working capital requirements of the Springmaid Beach Resort through the off-peak season, which amount shall be reduced by any amounts for working capital reserved by the third-party hotel operator. In addition, until certain renovations are complete, the loan documents impose a “cash trap” which restricts the use of accumulated cash from the Springmaid Beach Resort to the payment of working capital shortfalls, renovation expenditures and distributions required to satisfy the Company’s REIT requirements. The working capital reserve was included in restricted cash on the accompanying consolidated balance sheets.

Recent Financing Transaction

Oakland City Center Mortgage Loan

On August 18, 2017, in connection with the acquisition of Oakland City Center, the Company, through an indirect wholly owned subsidiary (the “Oakland City Center Owner”), entered into a loan agreement with Bank of America, N.A., an unaffiliated lender, for borrowings of up to $103.4 million (the “Oakland City Center Mortgage Loan”). At closing, $94.5 million had been disbursed to the Oakland City Center Owner with the remaining $8.9 million available for future disbursements to be used for tenant improvements and leasing commissions, subject to certain terms and conditions contained in the loan documents.

21

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

The Oakland City Center Mortgage Loan matures on September 1, 2022. The Oakland City Center Mortgage Loan bears interest at a floating rate of 175 basis points over one-month LIBOR. Monthly payments are initially interest only. Beginning October 1, 2020, monthly payments will include principal and interest with principal payments of $110,000 or, in the event the Oakland City Center Owner repays any principal of the loan amount, with principal payments calculated using an amortization schedule of 30 years and an annual interest rate of 6.0%, subject to certain terms and conditions contained in the loan documents. The Oakland City Center Owner has the right to prepay the loan in full or in part without fee, premium or penalty subject to certain terms and conditions as described in the loan documents.

KBS SOR US Properties II LLC (“SOR US Properties II”), the Company's indirect wholly owned subsidiary, provided a guaranty of (i) the principal balance and any interest or other sums outstanding under the Oakland City Center Mortgage Loan in the event of certain bankruptcy or insolvency proceedings involving the Oakland City Center Owner, SOR US Properties II or any affiliate thereof, and (ii) the payment of certain liabilities, losses or damages incurred by the lender as a result of certain intentional acts committed by Oakland City Center Owner, the fraud or intentional misrepresentation by Oakland City Center Owner or KBS SOR US Properties II in connection with the loan or the loan documents, the transfer of Oakland City Center Owner’s interest in the property in violation of the loan documents , and in the event of certain bankruptcy or insolvency proceedings involving Oakland City Center Owner, KBS SOR US Properties II or any affiliate thereof.

9. DERIVATIVE INSTRUMENTS

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into the derivatives for speculative purposes.

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

As of September 30, 2017 and December 31, 2016, the Company had three interest rate caps outstanding, which were not designated as hedging instruments. The following table summarizes the notional amount and other information related to the Company’s derivative instruments as of September 30, 2017 and December 31, 2016. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

						Fair Value of Asset
Derivative Instruments	Effective Date	Maturity Date	Notional Value		Reference Rate	September 30, 2017		December 31, 2016		Balance Sheet Location
Interest Rate Cap	12/29/2014	01/01/2018	$	26,000	One-month LIBOR at 3.00%	$	—	$	—	Prepaid expenses and other assets
Interest Rate Cap	12/15/2015	12/23/2018	$	28,330	One-month LIBOR at 3.00%	—		6		Prepaid expenses and other assets
Interest Rate Cap	12/01/2016	12/01/2019	$	47,110	One-month LIBOR at 3.00%	11		89		Prepaid expenses and other assets
Total Derivative Instruments not designated as hedging instruments						$	11	$	95

During the three and nine months ended September 30, 2017, the Company recorded an unrealized loss of $12,000 and $84,000, respectively, on derivative instruments, which is included in interest expense on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company recorded an unrealized loss of $1,000 and $43,000, respectively, on derivative instruments, which is included in interest expense on the accompanying consolidated statements of operations.

22

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

The Company enters into foreign currency forward contracts to mitigate its exposure to foreign currency exchange rate movements on its investment in unconsolidated entity. The foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future.

The following table summarizes the notional amount and other information related to the Company’s foreign currency forward contract as of September 30, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

Derivative Instrument	Notional Amount		Strike Price	Trade Date	Maturity Date
Derivative instrument not designated as hedging instrument
Foreign currency forward contract	$	2,668	1.2704 USD-EUR	09/05/2017	09/07/2021

During the three and nine months ended September 30, 2017, the Company recorded a foreign currency loss of $33,000 on foreign currency forward contract, which is included in general and administrative expenses on the accompanying consolidated statements of operations. The fair value of the foreign currency forward contract was $33,000 liability as of September 30, 2017 included in other liabilities on the accompanying balance sheets.

10. FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:

Cash and cash equivalents, restricted cash, rent and other receivables and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

23

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Real estate loan receivable: The Company’s real estate loan receivable is presented in the accompanying consolidated balance sheets at its amortized cost net of recorded loan loss reserves (if any) and not at fair value. The fair value of real estate loan receivable was estimated using an internal valuation model that considered the expected cash flows for the loan, underlying collateral value (for collateral-dependent loans) and 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. The Company classifies these inputs as Level 3 inputs.

Derivative instruments:The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments are determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate caps (floors) are determined using the market standard methodology of discounting the future expected cash payments (receipts) which would occur if variable interest rates rise above (below) the strike rate of the caps (floors). The variable interest rates used in the calculation of projected payments (receipts) on the cap (floor) are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities. The fair value of foreign currency forward contract are valued by comparing the contracted forward exchange rate to the current market exchange rate.

Notes payable: The fair value of the Company’s notes payable are estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

The following were the face value, carrying amount and fair value of the Company’s financial instruments as of September 30, 2017 and December 31, 2016, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial asset:
Real estate loan receivable	$	3,500	$	3,500	$	3,500	$	3,500	$	3,442	$	3,401
Financial liability:
Notes payable	$	309,384	$	305,878	$	309,398	$	212,010	$	208,581	$	211,565

Disclosure of the fair value of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Despite increased capital market and credit market activity, transaction volume for certain financial instruments remains relatively low. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

As of September 30, 2017, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate caps	$	11	$	—	$	11	$	—
Liability derivative - foreign currency forward contract	$	33	$	—	$	33	$	—

24

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

11. RELATED PARTY TRANSACTIONS

The Company has entered into the Advisory Agreement with the Advisor and dealer manager agreements with the Dealer Manager, with respect to the Private Offering and the Public Offering. These agreements entitle the Advisor and the Dealer Manager to specified fees upon the provision of certain offering-related services and the investment of funds in real estate-related investments, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company and certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as described in the Advisory Agreement. The Advisor also serves as the advisor for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”). The Dealer Manager also serves as the dealer manager for the KBS dividend reinvestment plan offerings for KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III and KBS Growth & Income REIT.

On January 6, 2014, the Company, together with KBS REIT I, KBS REIT II, KBS REIT III, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT, the Dealer Manager, the Advisor and other KBS-affiliated entities, 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 the Advisor and its insurance broker among each of the various entities covered by the plan, 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. The Advisor’s and the 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 was added to the insurance program at terms similar to those described above. In June 2017, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.

During the three and nine months ended September 30, 2017 and 2016, no other business transactions occurred between the Company and these other KBS-sponsored programs.

The Advisory Agreement has a one-year term that expires August 12, 2018. The Company may terminate the Advisory Agreement on 60 days’ written notice. The Advisor in its sole discretion may defer any fee payable to it under the Advisory Agreement. All or any portion of such fee not taken may be deferred without interest and paid when the Advisor determines.

25

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2017 and 2016, respectively, and any related amounts payable as of September 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2017		December 31, 2016
	2017		2016		2017		2016
Expensed
Asset management fees	739		359		1,820		908		21		—
Reimbursable operating expenses (1)	65		75		239		337		39		37
Real estate acquisition fee (2)	—		—		—		1,341		—		—
Capitalized
Acquisition fees (2)	4,126		25		4,151		228		4,126		27
Asset management fees	—		—		67		—		—		—
Additional Paid-in Capital
Sales commissions	267		1,074		2,028		2,808		—		—
Dealer manager fees	133		678		1,180		1,460		—		—
Stockholder servicing fees (3)	505		1,509		1,041		1,509		820		374
Reimbursable other offering costs (4)	87		157		583		177		957		374
	$	5,922	$	3,877	$	11,109	$	8,768	$	5,963	$	812

_____________________

⁽¹⁾ Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cyber-security related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. The Advisor may seek reimbursement for certain employee costs under the Advisory Agreement. These amounts totaled $65,000 and $235,000 for the three and nine months ended September 30, 2017, respectively, and $75,000 and $333,000 for the three and nine months ended September 30, 2016, respectively, and were the only employee costs reimbursed under the Advisory Agreement for the three and nine months ended September 30, 2017 and 2016. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

⁽²⁾ Prior to the adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees related to investment properties were expensed at the time of acquisition. 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.

⁽³⁾ Reflects the estimated amount of the stockholder servicing fee payable based on the terms of the Class T Shares.

⁽⁴⁾ See “Other Offering Costs” below.

Other Offering Costs

Organization and offering costs (other than selling commissions, dealer manager fees and the stockholder servicing fee) of the Company may be paid by the Advisor, the Dealer Manager or their affiliates on behalf of the Company or may be paid directly by the Company. These offering costs include all expenses incurred by the Company in connection with the Private Offering and the Public Offering. Organization costs include all expenses incurred by the Company in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company.

The Company recorded $1.0 million of offering costs (other than selling commissions and dealer manager fees) related to the Private Offering, all of which was initially paid by the Advisor or its affiliates on behalf of the Company and subsequently reimbursed by the Company. In addition, the Company paid $1.9 million in selling commissions and dealer manager fees related to the Private Offering.

26

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

During the Public Offering, pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company is obligated to reimburse the Advisor, the Dealer Manager or their affiliates, as applicable, for organization and other offering costs paid by them on behalf of the Company, provided that no reimbursements made by the Company to the Advisor or the Dealer Manager may cause total organization and offering expenses incurred by the Company in connection with the Public Offering (including selling commissions, dealer manager fees and the stockholder servicing fee) to exceed 15% of the aggregate gross proceeds from the Public Offering as of the date of reimbursement. In addition, the Advisor and its affiliates will reimburse the Company 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 the Company in connection with the primary portion of the Public Offering, regardless of when incurred, exceed 1.0% of gross offering proceeds from the primary portion of the Public Offering. The Advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary portion of the Public Offering to the extent they exceed 1.0% of gross proceeds from the primary portion of the Public Offering.

Through September 30, 2017, the Advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions dealer manager fees and stockholder servicing fees) on the Company’s behalf in connection with the Public Offering of approximately $10.2 million. As of September 30, 2017, the Company had recorded $13.0 million in selling commissions and dealer manager fees and $1.5 million of stockholder servicing fees. As of September 30, 2017, the Company had recorded $2.0 million of other organization and offering expenses, which amounts represent the Company’s maximum liability for organization and other offering costs as of September 30, 2017 based on the 1.0% limitation described above.

12. COMMITMENTS AND CONTINGENCIES

Management Agreement

Springmaid Beach Resort

The consolidated joint venture entity through which the Company leases the operations for Springmaid Beach Resort has entered into a management agreement with Doubletree Management LLC, an independent third-party hotel operator (the “Operator”) pursuant to which the Operator will manage and operate the Springmaid Beach Resort. The hotel was branded a DoubleTree by Hilton in September 2016 (the “Brand Commencement Date”).

Pursuant to the management agreement the Operator will receive 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 joint venture owner’s priority, which is 12% of the joint venture owner’s total investment);

• an additional services fee in the amount reasonably determined by the Operator from time to time; and

• a brand services fee in the amount of 4% of total rooms revenue, and an other brand services fee in an amount determined by the Operator from time to time.

The management agreement contains specific standards for the operation and maintenance of the hotel, which allows the Operator to maintain uniformity in the system created by the Operator’s franchise. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage and protection of trademarks. Compliance with the management agreement will require the Company to make significant expenditures for capital improvements.     

27

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

During the three and nine months ended September 30, 2017, the Company incurred $125,000 and $268,000 of fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company incurred $489,000 and $679,000 of fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations.

Q&C Hotel

A wholly owned subsidiary of the joint venture through which the Company leases the operations of the Q&C Hotel (“Q&C Hotel Operations”) has entered into a management agreement with Encore Hospitality, LLC (“Encore Hospitality”), an affiliate of the joint venture 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. 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). During the three and nine months ended September 30, 2017, the Company incurred $63,000 and $273,000 fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company incurred $57,000 and $227,000 fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations.

Q&C Hotel Operations has also entered into 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. 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 is also responsible for the payment of certain other fees, charges and costs as set forth in the agreement. During the three and nine months ended September 30, 2017, the Company incurred $211,000 and $658,000 of fees, respectively, related to the Marriott franchise agreement. During the three and nine months ended September 30, 2016, the Company incurred $115,000 and $157,000 of fees, respectively, related to the Marriott franchise agreement.

In addition, in connection with the execution of the franchise agreement, SOR US Properties II 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.

Lease Obligations

On December 1, 2016, the 210 West 31st Street Joint Venture acquired a leasehold interest in 210 West 31st Street. The leasehold interest for 210 West 31st Street expires on January 31, 2114. Future minimum lease payments owed by the 210 West 31st Street Joint Venture under the capital lease as of September 30, 2017 is as follows (in thousands):

October 1, 2017 through December 31, 2017	$	90
2018	360
2019	360
2020	360
2021	360
Thereafter	54,036
Total expected minimum lease obligations	55,566
Less: Amount representing interest (1)	(48,816		)
Present value of net minimum lease payments (2)	$	6,750

28

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

_____________________

⁽¹⁾ Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate at acquisition.

⁽²⁾ The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.

Economic Dependency

The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common stock; the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of September 30, 2017. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is a party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and the possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

13. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Status of the Offering

The Company commenced the Public Offering on August 12, 2014 and broke escrow on January 7, 2015. As of November 9, 2017, the Company had sold 11,132,941 and 10,587,211 shares of Class A and Class T common stock, respectively, in the Public Offering for aggregate gross offering proceeds of $211.0 million. Included in these amounts were 376,084 and 92,926 shares of Class A and Class T common stock, respectively, sold under the Company's dividend reinvestment plan for aggregate gross offering proceeds of $4.4 million.

Cash Distributions Paid

On October 3, 2017, the Company paid distributions of $0.3 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid distributions of $0.4 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from October 1, 2017 through October 31, 2017. Distributions for the period from September 1, 2017 through October 31, 2017 were calculated based on stockholders of record each day during the period 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.

29

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

Stock Dividends Issued

On August 10, 2017, the Company’s board of directors authorized stock dividends for the month of September 2017, in the amount of 0.001667 shares of each class of the Company’s common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on September 30, 2017.  The Company issued the September 2017 stock dividend, consisting of 44,877 shares, on October 4, 2017.

On August 10, 2017, the Company’s board of directors authorized stock dividends for the month of October 2017, in the amount of 0.001667 shares of each class of the Company’s common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on October 31, 2017.  The Company issued the October 2017 stock dividends, consisting of 45,366 shares, on November 2, 2017.

Distributions Declared

On October 11, 2017, the Company's board of directors declared cash distributions on the outstanding shares of all classes of its common stock based on daily record dates for the period from November 1, 2017 through November 30, 2017, which the Company expects to pay in December 2017. Investors may choose to receive cash distributions or purchase additional shares through the Company's dividend reinvestment plan. Distributions for this period will be calculated based on stockholders of record each day during this period 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.

Also on October 11, 2017, the Company's board of directors authorized a stock dividend for the month of November 2017 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on November 30, 2017. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company expects to issue this stock dividend in December 2017.

On November 13, 2017, the Company's board of directors declared cash distributions on the outstanding shares of all classes of its common stock based on daily record dates for the period from December 1, 2017 through December 31, 2017 and January 1, 2018 through January 31, 2018, which the Company expects to pay in January 2018 and February 2018, respectively. Investors may choose to receive cash distributions or purchase additional shares through the Company's dividend reinvestment plan. Distributions for these periods 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.

Also on November 13, 2017, the Company's board of directors authorized a stock dividend for the months of December 2017 and January 2018 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on December 31, 2017 and January 31, 2018, respectively. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company expects to issue these stock dividends in January 2018 and February 2018, respectively.

Acquisition and Related Financing of Real Estate

Grace Court

On October 3, 2017, the Company, through a joint venture (the “Grace Court Joint Venture”) (together, the “Grace Court Purchaser”) between the Company's indirect wholly owned subsidiary and Verus Grace Court, LLC and Verus Partners, LLC (collectively, the “JV Partner”), acquired a portfolio containing three office buildings (“Grace Court II, III and IV”) and one schoolhouse (“Grace Court School”) with an aggregate of 310,886 rentable square feet in Phoenix, Arizona (collectively, “Grace Court”). Neither the JV Partner nor the seller is affiliated with the Company or the Advisor.

30

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 1. Financial Statements (continued)

KBS STRATEGIC OPPORTUNITY REIT II, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2017

(unaudited)

The Company owns a 90% equity interest in the Grace Court Joint Venture. The JV Partner is the managing member of the joint venture; however, its authority is limited, as the Company must give approval of major decisions involving the business of the joint venture and Grace Court 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, the Company and the JV Partner may be required to make additional capital contributions to the Grace Court Joint Venture, in proportion to the members’ respective equity interests.

The purchase price of Grace Court was $33.3 million plus closing costs.

Grace Court II, III and IV were developed in 2003, 2008 and 2007, respectively, and Grace Court School was developed in 1911 and remodeled in 2006. At acquisition, Grace Court was 41% leased.

Grace Court Mortgage Loan

On October 3, 2017, in connection with the acquisition of Grace Court, the Grace Court Purchaser entered into a loan agreement with an unaffiliated lender for borrowings of up to $34.1 million (the “Grace Court Mortgage Loan”). As of October 3, 2017, $21.9 million had been disbursed with up to $1.3 million available for future disbursements to be used for capital expenditure project expenses and up to $10.9 million available for future disbursements to be used for tenant improvements and leasing expenses, subject to certain terms and conditions contained in the loan documents.

The Grace Court Mortgage Loan matures on October 9, 2020, with threeone-year extension options, subject to an extension fee and certain terms and conditions contained in the loan documents. The Grace Court Mortgage Loan bears interest at a floating rate of 405 basis points over one-month LIBOR, but at no point shall the interest rate be less than 5.05%. The Grace Court Joint Venture entered into an interest rate cap that effectively limits one-month LIBOR on the full loan amount at 3.00% effective October 3, 2017 through October 15, 2019. Monthly payments are interest only with the outstanding principal balance, all accrued and unpaid interest and all other amounts due on the maturity date. The Grace Court Purchaser has the right to prepay the loan in full or in part, subject to an exit fee and certain terms and conditions as described in the loan documents.

SOR US Properties II is providing a guaranty of the payment of (i) any losses, damages, costs, claims, fines, suits or other expenses of any kind incurred by the lender (including reasonable attorneys' fees and expenses and court costs) as a result of certain actions or omissions committed by us, the Grace Court Purchaser, SOR US Properties II and/or their affiliates in violation of the loan documents and (ii) the principal balance and any interest or sums outstanding under the Grace Court Mortgage Loan in the event of: the breach of certain covenants in the loan documents by the Grace Court Purchaser; certain prohibited transfers of Grace Court; and certain bankruptcy, insolvency or related proceedings involving the Grace Court Purchaser, the Grace Court Joint Venture, SOR US Properties II and /or their affiliates.

31

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of KBS Strategic Opportunity REIT II, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to KBS Strategic Opportunity REIT II, Inc., a Maryland corporation, and, as required by context, KBS Strategic Opportunity Limited Partnership II, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Strategic Opportunity REIT II, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

• We have a limited operating history and as of September 30, 2017, our total assets were $560.3 million. You will not have an opportunity to evaluate our investments before we make them, making our future operations speculative.

• We depend on our advisor to identify suitable investments and conduct our operations and our dealer manager to conduct our offering.

• 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 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-advised programs and investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions.

• Based on sales volume to date, we expect to raise substantially less than the maximum offering amount in our initial public 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.

• Our advisor and its affiliates receive fees in connection with transactions involving the origination, acquisition and management of our investments. These fees will be based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us and increase our stockholders’ risk of loss.

• Our distribution policy is generally not to use offering proceeds 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 may 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 (before deducting depreciation and other non-cash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. During the early stages of our initial public 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 an investment in us.

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

32

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

• Except with respect to unimproved or non-incoming producing property, we are not limited in the percentage of net proceeds 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 we initially expect to focus on.

• 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.

• We have made 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.

All forward-looking statements should be read in light of the risks identified herein in Part II, Item 1A “Risk Factors” and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (the “SEC”).

Overview

We were formed on February 6, 2013 as a Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2014. On July 3, 2013, we commenced a private placement offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), to offer a maximum of $105,000,000 of shares of common stock for sale to certain accredited investors, of which $5,000,000 of shares were offered pursuant to our dividend reinvestment plan. We ceased offering shares in our private offering on August 11, 2014. KBS Capital Markets Group LLC, an affiliate of our advisor, served as the dealer manager of the offering pursuant to a dealer manager agreement and was responsible for marketing our shares in the offering.

On November 14, 2013, we filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to register for sale to the public a maximum of 180,000,000 shares of common stock, of which 80,000,000 shares were to be offered pursuant to our dividend reinvestment plan. The SEC declared our registration statement effective on August 12, 2014 and we retained KBS Capital Markets Group LLC to serve as the dealer manager of the initial public offering pursuant to a dealer manager agreement. On February 11, 2016, we filed an amended registration statement on Form S-11 with the SEC to offer a second class of common stock designated as Class T shares and to designate our initially offered and outstanding common stock as Class A shares. Pursuant to the amended registration statement, 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 the offering. We commenced offering our Class T shares of our common stock for sale to the public on February 17, 2016. The dealer manager is responsible for marketing our shares in the initial public offering.

Our board of directors has extended the closing date of our ongoing primary initial public offering until the earlier of the sale of up to $650.0 million of shares, or the date the registration statement relating to our proposed follow-on offering (the “Follow-on Offering”) is declared effective by the SEC.

On August 10, 2017, we filed a registration statement on Form S-11 with the SEC to register the Follow-on Offering. Pursuant to the Follow-on Offering registration statement, we propose to register up to $500.0 million of shares of common stock for sale to the public in the primary Follow-on Offering. We also expect to register up to $125.0 million of shares of common stock pursuant to our dividend reinvestment plan in the Follow-on Offering. We can give no assurance that we will commence or complete the Follow-on Offering.

33

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

We intend to use substantially all of the net proceeds from our offerings 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 located in the United States and Europe. Such investments will include the acquisition of distressed debt, the origination and acquisition of mortgage, mezzanine, bridge and other real estate-related loans, investment in opportunistic real estate and investments in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. We may also invest in entities that make similar investments. Although this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego what we believe to be a good investment because it does not precisely fit our expected portfolio composition. As of September 30, 2017, we had invested in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity and one first mortgage loan. Additionally, as of September 30, 2017, we had entered into a joint venture to develop one retail property, which is currently under construction.

As of September 30, 2017, we had sold 10,912,156 and 10,407,804 shares of Class A and Class T common stock, respectively, for aggregate gross offering proceeds of $207.1 million in our initial public offering, including 342,508 and 78,227 shares of Class A and Class T common stock, respectively, under our dividend reinvestment plan for aggregate gross offering proceeds of $3.9 million. Also as of September 30, 2017, we had redeemed 138,208 and 5,298 shares of Class A and Class T common stock, respectively, for $1.2 million.

As of September 30, 2017, we had sold 3,619,851 shares of Class A common stock for gross offering proceeds of $32.2 million in our private offering. Additionally, on each of April 2, 2014 and July 31, 2014, we issued 120,106 shares of Class A common stock to an entity affiliated with two of our officers and affiliated directors for $1.0 million in separate private transactions exempt from the registration requirements of the Securities Act. On July 14, 2017, we issued 214,175 shares of Class A common stock to a business associate of two of our officers and affiliated director for $2.0 million in a separate private transaction exempt from the registration requirements of the Securities Act.

We have no employees and KBS Capital Advisors LLC (“KBS Capital Advisors”) has served as our external advisor since commencement of the private offering. As our advisor, KBS Capital Advisors manages our day-to-day operations and manages our portfolio of real estate properties and real estate-related investments. KBS Capital Advisors will make recommendations on all investments to our board of directors. All proposed investments must be approved by at least a majority of our board of directors, including a majority of the conflicts committee. Unless otherwise provided by our charter, the conflicts committee may approve a proposed investment without action by the full board of directors if the approving members of the conflicts committee constitute at least a majority of the board of directors. KBS Capital Advisors also provides asset-management, marketing, investor-relations and other administrative services on our behalf.

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 may make in Europe. We can give no assurances as to the number, if any, of investments we may make in Europe.

Market Outlook - Real Estate and Real Estate Finance Markets

The following discussion is based on management’s beliefs, observations and expectations with respect to the real estate and real estate finance markets.

The global economy is broadly improving albeit at an uneven pace. European economic growth has recently picked up, with improving employment data in most of the European Union countries. The U.K. and China remain areas of concern. The U.K. is working through its BREXIT process, whereas the Chinese economy has shown signs of stabilization, but is still struggling with uncertainty in its banking system in relation to bad loans. Against this backdrop, the central banks of the world’s major industrialized economies are beginning to back away from their strong monetary accommodation. Quantitative easing (“QE”) in Japan and Europe is slowing, but the liquidity generated from these programs continues to impact the global capital markets.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

At a duration of 100 months (as of the end of third quarter 2017), the current business cycle, which commenced in June 2009, is the third longest in U.S. history, behind only the periods between 1961 - 1969 and 1991 - 2001. In June 2017, the U.S. Federal Reserve (the “Fed”) increased interest rates for the fourth time in three years. Expectations are that the Fed will increase rates again in December, citing low unemployment and strong economic growth. The Fed is still attempting to normalize the level of interest rates in the United States. U.S. interest rates are relatively high when compared to Europe, where the European Central Bank is still engaging in QE. Global inflation is starting to show signs of life as U.S. inflation has grown to approximately 1.9% versus 2.9% in the U.K. and 1.5% in the Eurozone. Real gross domestic product (“GDP”) in the United States has had two consecutive quarters of 3.0% or greater growth, and the U.S. unemployment rate is currently a relatively low 4.2%. Personal income growth has started to pick up and unemployment statistics indicate that labor market conditions are finally showing real improvements. Political uncertainty surrounding the current administration’s budget, tax reform plans and the continued weakness in retailers, all may adversely impact business and consumer confidence.

In 2017 the U.S. commercial real estate market has seen a decline in transaction volume and a slowing of price increases. In the aggregate, property level operating income growth has begun to slow, while lending standards have tightened. The United States continues to benefit from inflows of foreign capital, albeit at a slowing rate. The capital flows from China have dropped as the Chinese government has successfully imposed constraints on capital leaving the country. The industrial property sector is a standout for investors, as internet sales volumes continue to increase the demand for warehouses and logistics-related assets. Traditional sources of capital are favoring a “risk-off” approach, as capital flows have shifted equity towards debt, or secured, investing. Commercial real estate returns are increasingly being driven by property income (yield), as opposed to price appreciation through cap rate compression.

Lenders with long memories remain disciplined in their underwriting of investments. For balance sheet lenders, such as banks and insurance companies, underwriting standards for commercial real estate have tightened. This has resulted in lower loan-to-value and higher debt coverage ratios. CMBS originations rebounded in the third quarter as banks and insurance companies tightened loan terms. CMBS volumes are on pace to beat 2016 issuance volumes. This is a positive for the U.S. commercial real estate markets as it illustrates the virtues of having a diversified set of funding sources.

Liquidity and Capital Resources

On January 7, 2015, we broke escrow in our initial public offering. We are dependent upon the net proceeds from our ongoing initial public offering to conduct our proposed operations. We expect to obtain the capital required to purchase and originate real estate and real estate-related investments and conduct our operations from the proceeds of our offering, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of September 30, 2017, we had sold 10,912,156 and 10,407,804 shares of Class A and Class T common stock, respectively, for aggregate gross offering proceeds of $207.1 million in our initial public offering. Additionally, we sold 3,619,851 shares of common stock in our private offering for gross offering proceeds of $32.2 million.

Regulatory developments related to the reporting of our estimated value per share under recently effective FINRA and NASD Conduct Rules, and changes to the definition of fiduciary under ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended may significantly affect our ability to raise substantial additional funds in the public offering.  If we are unable to raise substantially more funds in our initial public offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a REIT, regardless of whether we are able to raise substantial funds in the initial public offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our hotel properties generate cash flow in the form of room, food, beverage and convention services, campground and other revenues, which are reduced by hotel expenses, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our hotel properties are primarily dependent upon the occupancy levels of our hotels, the average daily rates and how well we manage our expenditures. The following table provides summary information regarding our hotel properties as of September 30, 2017:

Property	Number of Rooms	Percentage Occupied for the Nine Months Ended September 30, 2017	Average Revenue per Available Room	Average Daily Rate
Springmaid Beach Resort (1)	452	79.1%	$109.47	$138.31
Q&C Hotel	196	67.3%	$108.11	$160.64

_____________________

⁽¹⁾ In October 2016, Springmaid Beach Resort sustained significant damage from Hurricane Matthew, the result of which placed 238 rooms out of service. Certain rooms have been and continue to be offline. As of September 30, 2017, 16 rooms remain out of service as a result of the hurricane damage. Rooms not in service were excluded from the percentage occupied and average revenue per available room.

Our office and apartment properties generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, capital expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from office and apartment properties is primarily dependent upon the occupancy level of our properties, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures. As of September 30, 2017, we owned three office properties that were 90% occupied and one apartment property that was 94% occupied.

Our real estate-related investment generates cash flow in the form of interest income, which is reduced by the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate-related investment is primarily dependent on the operating performance of the underlying collateral and the borrower’s ability to make its debt service payments. As of September 30, 2017, the borrower under our real estate loan receivable was current on all contractual debt service payments to us.

As of September 30, 2017, we had mortgage debt obligations in the aggregate principal amount of $309.4 million, with a weighted-average remaining term of 2.8 years. As of September 30, 2017, $12.1 million was available under the 210 West 31st Street Mortgage Loan 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.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor and the dealer manager. During our organization and offering stage, these payments include payments to the dealer manager for selling commissions, the dealer manager fee and the stockholder servicing fee and payments to the dealer manager and our advisor for reimbursement of certain commercially reasonable organization and offering expenses, provided that no reimbursements made by us to our advisor or dealer manager may cause total organization and offering expenses incurred by us in connection with our initial public offering (including selling commissions, dealer manager fees, stockholder servicing fees and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from our public offering as of the date of reimbursement. As of September 30, 2017, our advisor has incurred organization and offering expenses on our behalf related to our initial public offering of approximately $10.2 million. In addition, 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 the primary portion of our initial public offering, regardless of when incurred, exceed 1.0% of gross offering proceeds from the primary portion of our initial public offering. The Advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary portion of our initial public offering to the extent they exceed 1.0% of gross proceeds from the primary portion of the initial public offering. There was no limit on the organization and offering expenses we could incur in connection with our private offering. As of September 30, 2017, our advisor had incurred offering expenses on our behalf related to our private offering of $1.0 million, all of which have been reimbursed from proceeds from our now terminated private offering. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and origination or purchase of investments, the management of our assets and costs incurred by our advisor in providing services to us. We will also continue to make payments to our dealer manager related to the stockholder servicing fees. Our currently effective advisory agreement expires August 12, 2018 and may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and our conflicts committee.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Among the fees payable to our advisor is an asset management fee. We pay our advisor 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 the real property investments is 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 our advisor). The cost of the loans and any investments other than real property is 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 is determined based on our proportionate share of the underlying investment.

In addition, an affiliate of our advisor, KBS Management Group, was recently formed to provide property management services with respect to certain properties owned by KBS-advised companies.  In the future, we may engage KBS Management Group with respect to one or more of our properties to provide property management services.  With respect to any such properties, we would expect to pay KBS Management Group a monthly fee equal to a percentage of the rent (to be determined on a property by property basis, consistent with current market rates).

We elected to be taxed and operating as a REIT beginning with our taxable year ended December 31, 2014. We intend to continue to operate as a REIT. To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. We have not established a minimum distribution level.

Under our charter, we are required to limit our total operating expenses to the greater of 2% of our average invested assets or 25% of our net income for the four most recently completed fiscal quarters, as these terms are defined in our charter, unless the 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, 2017 did not exceed the charter imposed limitation.

Cash Flows from Operating Activities

We commenced operations on September 4, 2014 in connection with our first investment. As of September 30, 2017, we had invested in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity and one first mortgage loan. Additionally, as of September 30, 2017, we had entered into a joint venture to develop one retail property, which is currently under construction. During the nine months ended September 30, 2017, net cash provided by operating activities was $10.4 million. We expect that our cash flows from operating activities will generally increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments and the related operations of such real estate investments.

Cash Flows from Investing Activities

Net cash used in investing activities was $162.6 million for the nine months ended September 30, 2017 and primarily consisted of the following:

• Acquisition of an office property for $154.7 million;

• $7.8 million of improvements to real estate;

• $5.1 million of proceeds from insurance claims;

• $4.1 million of payments for construction in progress; and

• $1.0 million escrow deposit for the future acquisition of an office property.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cash Flows from Financing Activities

Net cash provided by financing activities was $152.7 million for the nine months ended September 30, 2017 and primarily consisted of the following:

• $96.1 million of net cash provided by debt and other financings as a result of proceeds from notes payable of $97.4 million, partially offset by payments of deferred financing costs of $1.2 million;

• $57.8 million of net cash provided by offering proceeds related to our initial public offering, net of payments of commissions, dealer manager fees and other organization and offering costs of $3.8 million;

• $1.1 million million of net cash distributions, after giving effect to distributions reinvested by stockholders of $1.7 million;

• $0.6 million of cash used for redemptions of common stock; and

• $0.5 million of noncontrolling interest contributions.

In order to execute our investment strategy, we utilize secured debt and we may, to the extent available, utilize unsecured debt, to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinancing and interest risks, are properly balanced with the benefit of using leverage. Once we have fully invested the proceeds from our offering stage, we expect our debt financing will be 60% or less of the cost of our tangible assets (before deducting depreciation or other non-cash reserves). There is no limitation on the amount we may borrow for any single investment. Our charter limits our total liabilities such that our total liabilities may not exceed 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. As of September 30, 2017, our borrowings and other liabilities were approximately 60% of the cost (before depreciation and other noncash reserves) and book value (before depreciation) of our tangible assets.

Contractual Commitments and Contingencies

The following is a summary of our contractual obligations as of September 30, 2017 (in thousands):

			Payments Due During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2017		2018-2019		2020-2021		Thereafter
Outstanding debt obligations (1)	$	309,384	$	38,000	$	135,487	$	43,047	$	92,850
Interest payments on outstanding debt obligations (2)	30,381		3,042		19,326		6,176		1,837
Stockholder servicing fee liability (3)	820		330		490		—		—
Capital lease obligations	55,566		90		720		720		54,036

_____________________

⁽¹⁾ Amounts include principal payments only.

⁽²⁾ Projected interest payments are based on the outstanding principal amounts and interest rates in effect at September 30, 2017. We incurred interest expense of $7.6 million, excluding amortization of deferred financing costs of $1.1 million and unrealized loss on interest rate cap of $84,000 and including interest capitalized of $3.0 million for the nine months ended September 30, 2017.

⁽³⁾ Stockholder servicing fee is an annual fee of 1.0% of the purchase price per Class T share sold in our primary public offering for services rendered to Class T stockholders by the broker dealer of record after the initial sale of the Class T share. The stockholder servicing fee will accrue daily and be paid monthly in arrears for up to the fourth anniversary of the issuance of the Class T share. The amount shown is the amount estimated as payable as of September 30, 2017 based on the terms of the Class T shares.

In addition, as of September 30, 2017, we expect to incur approximately $14.8 million of development costs through 2018 related to 210 West 31st Street.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Results of Operations

Overview

As of September 30, 2016, we had invested in two hotel properties, two office properties, an investment in an unconsolidated entity and one first mortgage loan. As of September 30, 2017, we had invested in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity and one first mortgage loan. Additionally, as of September 30, 2017, we had entered into a joint venture to develop one retail property, which is currently under construction. We funded the acquisitions of these investments with proceeds from our terminated private offering, initial public offering and debt financing. Our results of operations for the three and nine months ended September 30, 2017 are not indicative of those in future periods as we commenced operations on September 4, 2014 in connection with our first investment and expect to make future acquisitions of real estate and real estate-related investments. In general, we expect that our revenue and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

Comparison of the three months ended September 30, 2017 versus the three months ended September 30, 2016

The following table provides summary information about our results of operations for the three months ended September 30, 2017 and 2016 (dollar amounts in thousands):

	Three Months Ended September 30,				Increase (Decrease)		Percentage Change		$ Change Due to Acquisitions (1)	$ Change Due to  Investments Held Throughout Both Periods (2)
	2017		2016
Hotel revenues	$	12,160	$	8,599	$	3,561	41	%	—	3,561
Office revenues	4,218		1,892		2,326		123	%	2,400	(74	)
Apartment revenues	1,746		—		1,746		n/a		1,746	—
Interest income from real estate loans receivable	103		101		2		2	%	—	2
Hotel expenses	5,807		5,157		650		13	%	—	650
Office expenses	1,536		521		1,015		195	%	796	219
Apartment expenses	1,026		—		1,026		n/a		1,026	—
Asset management fees to affiliate	739		359		380		106	%	359	21
General and administrative expenses	1,146		646		500		77	%	n/a	n/a
Depreciation and amortization	3,709		2,314		1,395		60	%	1,745	(350	)
Interest expense	2,255		931		1,324		142	%	1,235	89
Casualty-related income	1,614		—		1,614		n/a		—	1,614

_____________________

⁽¹⁾ Represents the dollar amount increase (decrease) for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 related to real estate acquired on or after July 1, 2016.

⁽²⁾ Represents the dollar amount increase (decrease) for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 with respect to real estate and real estate-related investments owned by us during the entire periods presented.

Hotel revenues increased from $8.6 million for the three months ended September 30, 2016 to $12.2 million for the three months ended September 30, 2017 primarily due to $5.5 million of business interruption insurance recovery, partially offset by the impact of Hurricane Matthew in October 2016, the result of which placed certain rooms at Springmaid Beach Resort out of service during the three months ended September 30, 2017. We expect hotel revenues, excluding the impact of business interruption insurance recoveries, to increase in future periods as the majority of rooms at the Springmaid Beach Resort have been fully restored and as a result of the ongoing improvements in connection with the re-branding strategy of our hotel properties.

Office revenues increased from $1.9 million for the three months ended September 30, 2016 to $4.2 million for the three months ended September 30, 2017 primarily as a result of the growth in our real estate portfolio. We expect office revenue to increase in future periods as a result of owning the office property acquired in 2017 for an entire period and anticipated future acquisitions of office properties.

Apartment revenues for the three months ended September 30, 2017 were $1.7 million. We expect apartment revenues to vary in future periods depending on occupancy rates and rental rates and whether we acquire any additional apartment properties.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest income from our real estate loan receivable, recognized using the interest method, remained consistent at approximately $0.1 million for the three months ended September 30, 2017 and 2016.

Hotel expenses increased from $5.2 million for the three months ended September 30, 2016 to $5.8 million for the three months ended September 30, 2017 primarily due to increased property taxes and increased sales and marketing costs in connection with the re-branding strategy of our hotel properties. Office expenses increased from $0.5 million for the three months ended September 30, 2016 to $1.5 million for the three months ended September 30, 2017 primarily as a result of the growth in our real estate portfolio. Apartment expenses for the three months ended September 30, 2017 were $1.0 million. We expect total expenses to increase in future periods as a result of anticipated future acquisitions of real estate properties.

Asset management fees to affiliate increased from $0.4 million for the three months ended September 30, 2016 to $0.7 million for the three months ended September 30, 2017 primarily as a result of the growth of our real estate portfolio. We expect asset management fees to increase in future periods as a result of anticipated future acquisitions of real estate properties and as a result of any improvements we make to our properties. Approximately $21,000 of asset management fees incurred were payable as of September 30, 2017.

Depreciation and amortization expenses increased from $2.3 million for the three months ended September 30, 2016 to $3.7 million for the three months ended September 30, 2017 primarily due to the growth of our real estate portfolio, partially offset by the effect of fully amortized assets related to properties held throughout both periods. We expect depreciation and amortization expenses to increase in future periods as a result of anticipated future acquisitions of real estate properties.

Interest expense increased from $0.9 million for the three months ended September 30, 2016 to $2.3 million for the three months ended September 30, 2017 primarily due to increased borrowings in connection with our acquisition activity. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing, and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

Casualty-related income, net for the three months ended September 30, 2017 was $1.6 million which relates to the insurance claim settlement in connection with the impact of Hurricane Matthew at the Springmaid Beach Resort. To the extent that insurance proceeds ultimately exceeded the difference between replacement cost and net book value of the impaired assets, the post-hurricane costs incurred, and/or business interruption losses recognized, the excess was reflected as income in the period those amounts were received or when receipt was deemed probable to occur.

Comparison of the nine months ended September 30, 2017 versus the nine months ended September 30, 2016

The following table provides summary information about our results of operations for the nine months ended September 30, 2017 and 2016 (dollar amounts in thousands):

	Nine Months Ended September 30,				Increase (Decrease)			Percentage Change		$ Change Due to Acquisitions (1)		$ Change Due to  Investments Held Throughout Both Periods (2)
	2017		2016
Hotel revenues	$	23,473	$	20,563	$	2,910		14	%	—		2,910
Office revenues	7,824		3,289		4,535			138	%	4,627		(92	)
Apartment revenues	5,184		—		5,184			n/a		5,184		—
Interest income from real estate loans receivable	303		298		5			2	%	—		5
Hotel expenses	14,839		13,466		1,373			10	%	—		1,373
Office expenses	2,713		860		1,853			215	%	1,786		67
Apartment expenses	2,724		—		2,724			n/a		2,724		—
Asset management fees to affiliate	1,820		908		912			100	%	876		36
Real estate acquisition fees and expenses to affiliate	—		1,341		(1,341		)	(100	)%	(1,341	)	—
Real estate acquisition fees and expenses	—		123		(123		)	(100	)%	(123	)	—
General and administrative expenses	2,492		2,073		419			20	%	n/a		n/a
Depreciation and amortization	9,176		5,299		3,877			73	%	4,231		(354	)
Interest expense	5,798		2,379		3,419			144	%	3,335		84
Casualty-related income	1,614		—		1,614			n/a		—		1,614

40

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

_____________________

⁽¹⁾ Represents the dollar amount increase (decrease) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 related to real estate acquired on or after January 1, 2016.

⁽²⁾ Represents the dollar amount increase (decrease) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 with respect to real estate and real estate-related investments owned by us during the entire periods presented.

Hotel revenues increased from $20.6 million for the nine months ended September 30, 2016 to $23.5 million for the nine months ended September 30, 2017 primarily due to $5.8 million of business interruption insurance recovery, partially offset by the impact of Hurricane Matthew in October 2016, the result of which placed certain rooms at Springmaid Beach Resort out of service during the nine months ended September 30, 2017. We expect hotel revenues, excluding the impact of business interruption insurance recoveries, to increase in future periods as the majority of rooms at the Springmaid Beach Resort have been fully restored and as a result of the ongoing improvements in connection with the re-branding strategy of our hotel properties.

Office revenues increased from $3.3 million for the nine months ended September 30, 2016 to $7.8 million for the nine months ended September 30, 2017 primarily as a result of the growth in our real estate portfolio. We expect office revenue to increase in future periods as a result of owning the office property acquired in 2017 for an entire period and anticipated future acquisitions of office properties.

Apartment revenues for the nine months ended September 30, 2017 were $5.2 million. We expect apartment revenues to vary in future periods depending on occupancy rates and rental rates and whether we acquire any additional apartment properties.

Interest income from our real estate loan receivable, recognized using the interest method, remained consistent at approximately $0.3 million for the nine months ended September 30, 2017 and 2016.

Hotel expenses increased from $13.5 million for the nine months ended September 30, 2016 to $14.8 million for the nine months ended September 30, 2017 primarily due to increased property taxes and increased sales and marketing costs in connection with the re-branding strategy of our hotel properties. Office expenses increased from $0.9 million for the nine months ended September 30, 2016 to $2.7 million for the nine months ended September 30, 2017 primarily as a result of the growth in our real estate portfolio. Apartment expenses for the nine months ended September 30, 2017 were $2.7 million. We expect total expenses to increase in future periods as a result of anticipated future acquisitions of real estate properties.

Asset management fees to affiliate increased from $0.9 million for the nine months ended September 30, 2016 to $1.8 million for the nine months ended September 30, 2017 primarily as a result of the growth of our real estate portfolio. We expect asset management fees to increase in future periods as a result of anticipated future acquisitions of real estate properties and as a result of any improvements we make to our properties. Approximately $21,000 of asset management fees incurred were payable as of September 30, 2017.

Real estate acquisition fees and expenses to affiliate and non-affiliates were $1.5 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we did not acquire any investments accounted for as a business combination. We adopted ASU No. 2017-01 for the reporting period beginning January 1, 2017.  As a result of the adoption of ASU No. 2017-01, our acquisitions of real estate properties beginning January 1, 2017 qualified as asset acquisitions as opposed to business combinations. Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed. We expect real estate acquisition fees and expenses to vary in future periods based upon acquisition activity.

Depreciation and amortization expenses increased from $5.3 million for the nine months ended September 30, 2016 to $9.2 million for the nine months ended September 30, 2017 primarily due to the growth of our real estate portfolio, partially offset by the effect of fully amortized assets related to properties held throughout both periods. We expect depreciation and amortization expenses to increase in future periods as a result of anticipated future acquisitions of real estate properties.

Interest expense increased from $2.4 million for the nine months ended September 30, 2016 to $5.8 million for the nine months ended September 30, 2017 primarily due to increased borrowings in connection with our acquisition activity. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the amount of proceeds raised in our ongoing initial public offering, the availability and cost of debt financing, and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

Casualty-related income, net for the nine months ended September 30, 2017 was $1.6 million which relates to the insurance claim settlement in connection with the impact of Hurricane Matthew at the Springmaid Beach Resort.

41

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Funds from Operations, Modified Funds from Operations and Adjusted Modified Funds from Operations

We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, our management also uses modified funds from operations (“MFFO”) as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above- and below-market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010 as interpreted by management. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.

In addition, our management uses an adjusted MFFO (“Adjusted MFFO”) as an indicator of our ongoing performance as well as our dividend sustainability. Adjusted MFFO provides adjustments to reduce MFFO related to operating expenses that are capitalized with respect to certain of our investments in undeveloped land. 

We believe that MFFO and Adjusted MFFO are helpful as measures of ongoing operating performance because they exclude costs that management considers more reflective of investing activities and other non-operating items included in FFO.  Management believes that excluding acquisition costs (to the extent such costs have been recorded as operating expenses) from MFFO and Adjusted MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage.  MFFO and Adjusted MFFO also exclude non-cash items such as straight-line rental revenue.  Additionally, we believe that MFFO and Adjusted MFFO provide investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

FFO, MFFO and Adjusted MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO, MFFO and Adjusted MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO, MFFO and Adjusted MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO, MFFO and Adjusted MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO, MFFO and Adjusted MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures.

Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases and acquisition fees and expenses, are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:

• Adjustments for straight-line rent.  These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, while also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;

• Amortization of above- and below-market leases.  Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate; and

• Acquisition fees and expenses. Prior to our early adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees and expenses related to the acquisition of real estate were generally expensed. Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis. Additionally, acquisition fees and expenses have been funded from the proceeds from our offerings and debt financings and not from our operations. We believe this exclusion is useful to investors as it allows investors to more accurately evaluate the sustainability of our operating performance.

Adjusted MFFO includes adjustments to reduce MFFO related to real estate taxes, property insurance and financing costs which are capitalized with respect to certain renovation projects.  We have included adjustments for the costs incurred necessary to bring these investments to their intended use, as these costs are recurring operating costs that are capitalized in accordance with GAAP and not reflected in our net income (loss), FFO and MFFO.   

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculations of MFFO and Adjusted MFFO, for the three and nine months ended September 30, 2017 and 2016 (in thousands). No conclusions or comparisons should be made from the presentation of these periods.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss) attributable to common stockholders	$	2,893		$	601		$	(834	)	$	(2,302	)
Depreciation of real estate assets	2,416			1,407			5,870			3,642
Amortization of lease-related costs	1,293			907			3,306			1,657
Adjustments for noncontrolling interests (1)	(166		)	(119		)	(534		)	(334		)
Adjustments for investment in unconsolidated entity (2)	—			29			—			29
FFO attributable to common stockholders (3)	6,436			2,825			7,808			2,692
Straight-line rent and amortization of above- and below-market leases	(953		)	(283		)	(1,293		)	(457		)
Amortization of discounts and closing costs	(20		)	(18		)	(58		)	(52		)
Unrealized losses on derivative instruments	44			1			117			43
Real estate acquisition fees to affiliate	—			—			—			1,341
Real estate acquisition fees and expenses	—			—			—			123
Adjustments for noncontrolling interests (1)	(5		)	—			(16		)	—
MFFO attributable to common stockholders (3)	5,502			2,525			6,558			3,690
Other capitalized operating expenses (4)	(159		)	(57		)	(446		)	(150		)
Casualty-related income, net (5)	(1,614		)	—			(1,614		)	—
Adjustments for noncontrolling interests - consolidated entity (1)	161			6			161			15
Adjusted MFFO attributable to common stockholders (3)	$	3,890		$	2,474		$	4,659		$	3,555

_____________________

⁽¹⁾Reflects adjustments to eliminate the noncontrolling interest holders’ share of the adjustments to convert our net income (loss) attributable to common stockholders to FFO, MFFO and Adjusted MFFO.

⁽²⁾Reflects adjustments to add back our noncontrolling interest share of the adjustments to convert our net income (loss) attributable to common stockholders to FFO for our equity investment in an unconsolidated entity.

⁽³⁾FFO, MFFO and Adjusted MFFO includes $5.5 million and $5.8 million of business interruption insurance recovery for the three and nine months ended September 30, 2017, respectively.

⁽⁴⁾Reflects real estate taxes, property insurance and financing costs that are capitalized with respect to certain renovation projects but excluding development projects. During the time in which we are incurring costs necessary to bring these investments to their intended use, certain normal recurring operating costs are capitalized in accordance with GAAP and not reflected in our net income (loss), FFO and MFFO.

⁽⁵⁾Reflects property damages and insurance recoveries related to the impact of Hurricane Matthew at the Springmaid Beach Resort. We exclude them from Adjusted MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis. We believe this exclusion is useful to investors as it allows investors to more accurately evaluate the sustainability of our operating performance.

FFO, MFFO and Adjusted MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO, MFFO and Adjusted MFFO, such as tenant improvements, building improvements and deferred leasing costs. We expect FFO, MFFO and Adjusted MFFO to improve in future periods to the extent that we continue to lease up vacant space and acquire additional assets. We expect FFO, MFFO and Adjusted MFFO to increase as a result of acquisitions.

Organization and Offering Costs

Our organization and offering costs (other than selling commissions, dealer manager fees and the stockholder servicing fee) may be paid by our advisor, the dealer manager or their affiliates on our behalf or may be paid directly by us. These offering costs include all expenses incurred in connection with our offerings. Organization costs include all expenses incurred in connection with our formation, including but not limited to legal fees and other costs to incorporate.

We 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.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

During our initial public offering, pursuant to the advisory agreement and dealer manager agreement, we are obligated to reimburse our advisor, the dealer manager or their affiliates, as applicable, for organization and other offering costs paid by them on behalf of us, provided that no reimbursements made by us to our advisor or the dealer manager may cause total organization and offering expenses incurred by us in connection with our initial public offering (including selling commissions, dealer manager fees and the stockholder servicing fees) to exceed 15% of the aggregate gross proceeds from our initial public offering as of the date of reimbursement. In addition, 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 the primary portion of our initial public offering, regardless of when incurred, exceed 1.0% of gross offering proceeds from the primary portion of our initial public offering. The Advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary portion of our initial public offering to the extent they exceed 1.0% of gross proceeds from the primary portion of the Public Offering as of the termination of the primary portion of our initial public offering.

Through September 30, 2017, the 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 the public offering of approximately $10.2 million. As of September 30, 2017, we had recorded $13.0 million in selling commissions and dealer manager fees and $1.5 million of stockholder servicing fees. As of September 30, 2017, we had recorded $2.0 million of other organization and offering expenses, which amount represent our maximum liability for organization and offering costs as of September 30, 2017 based on the 1.0% limitation described above.

Distributions

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. 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.

Until we have fully invested the proceeds of our public offering, and from time to time during our operational stage, 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. Distributions declared, distributions paid and cash flow provided by operations were as follows for the first, second and third quarters of 2017 (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 Provided by Operations
Period							Cash		Reinvested		Total
First Quarter 2017	$	852	$	0.047	$	0.024	$	320	$	501	$	821	$	457
Second Quarter 2017	960		0.048		0.024		357		583		940		338
Third Quarter 2017	1,035		0.048		0.025		382		637		1,019		9,571
	$	2,847	$	0.143	$	0.073	$	1,059	$	1,721	$	2,780	$	10,366

_____________________

⁽¹⁾ Distributions for the period from January 1, 2017 through September 30, 2017 were based on daily record dates and were calculated 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.

⁽²⁾ Assumes share was issued and outstanding each day that was a record date for distributions during the period presented.

⁽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, 2017, we paid aggregate distributions of $2.8 million, including $1.1 million distributions paid in cash and $1.7 million of distributions reinvested through our dividend reinvestment plan. Our net loss attributable to common stockholders for the nine months ended September 30, 2017 was $0.8 million and cash flow provided by operations was $10.4 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $1.8 million of cash flow from operating activities and $1.0 million of debt financing. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments.

45

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

From inception through September 30, 2017, we paid cumulative distributions of $6.5 million and our cumulative net loss during the same period was $11.9 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.

In addition, during the nine months ended September 30, 2017, our board of directors declared stock dividends for each month based on a single record date at the end of each month in an amount that would equal a 2% annualized stock dividend per share of common stock if paid each month for a year.  Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend.

Going forward we expect our board of directors to continue to authorize and declare cash distributions based on daily record dates and to pay these distributions on a monthly basis and during our offering stage to continue to authorize and declare stock dividends based on a single record date as of the end of the month, and to issue these dividends on a monthly basis. Cash distributions and stock dividends will be determined by our board of directors based on our financial condition and such other factors as our board of directors deems relevant. Our board of directors has not pre-established a percentage rate of return for stock dividends or cash distributions to stockholders. We have not established a minimum dividend or distribution level, and our charter does not require that we make dividends or distributions to our stockholders.

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 our public 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 net 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.

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.

46

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Critical Accounting Policies

Our consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC. There have been no significant changes to our policies during 2017.

Subsequent Events

We evaluate subsequent events up until the date the consolidated financial statements are issued.

Status of the Offering

We commenced our initial public offering on August 12, 2014 and broke escrow on January 7, 2015. As of November 9, 2017, we had sold 11,132,941 and 10,587,211 shares of Class A and Class T common stock, respectively, in our initial public offering for aggregate gross offering proceeds of $211.0 million. Included in these amounts were 376,084 and 92,926 shares of Class A and Class T common stock, respectively, sold under our dividend reinvestment plan for aggregate gross offering proceeds of $4.4 million.

Cash Distributions Paid

On October 3, 2017, we paid distributions of $0.3 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from September 1, 2017 through September 30, 2017. On November 1, 2017, we paid distributions of $0.4 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from October 1, 2017 through October 31, 2017. Distributions for the period from September 1, 2017 through October 31, 2017 were calculated based on stockholders of record each day during the period 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.

Stock Dividends Issued

On August 10, 2017, our board of directors authorized stock dividends for the month of September 2017, in the amount of 0.001667 shares of our common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on September 30, 2017.  We issued the September 2017 stock dividend, consisting of 44,877 shares, on October 4, 2017.

On August 10, 2017, our board of directors authorized stock dividends for the month of October 2017, in the amount of 0.001667 shares of our common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on October 31, 2017.  We issued the October 2017 stock dividend, consisting of 45,366 shares, on November 2, 2017.

Distributions Declared

On October 11, 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 November 1, 2017 through November 30, 2017, which we expect to pay in December 2017. Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan. Distributions for this period will be calculated based on stockholders of record each day during this period 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.

Also on October 11, 2017, our board of directors authorized a stock dividend for the month of November 2017 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on November 30, 2017. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. We expect to issue this stock dividend in December 2017.

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PART I. FINANCIAL INFORMATION (CONTINUED)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

On November 13, 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 December 1, 2017 through December 31, 2017 and January 1, 2018 through January 31, 2018, which we expect to pay in January 2018 and February 2018, respectively. Investors may choose to receive cash distributions or purchase additional shares through our dividend reinvestment plan. Distributions for these periods 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.

Also on November 13, 2017, our board of directors authorized a stock dividend for the months of December 2017 and January 2018 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on December 31, 2017 and January 31, 2018, respectively. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. We expect to issue these stock dividends in January 2018 and February 2018, respectively.

Acquisition of Real Estate

Grace Court

On October 3, 2017, we, through a joint venture (the “Grace Court Joint Venture”) between our indirect wholly owned subsidiary and Verus Grace Court, LLC and Verus Partners, LLC (collectively, the “JV Partner”) (together, the “Grace Court Purchaser”), acquired a portfolio containing three office buildings (“Grace Court II, III and IV”) and one schoolhouse (“Grace Court School”) with an aggregate of 310,886 rentable square feet in Phoenix, Arizona (collectively, “Grace Court”). Neither the JV Partner nor the seller is affiliated with us or our advisor.

We own a 90% equity interest in the Grace Court Joint Venture. The 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 Grace Court 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 JV Partner may be required to make additional capital contributions to the Grace Court Joint Venture, in proportion to the members’ respective equity interests.

The purchase price of Grace Court was $33.3 million plus closing costs.

Grace Court II, III and IV were developed in 2003, 2008 and 2007, respectively, and Grace Court School was developed in 1911 and remodeled in 2006. At acquisition, Grace Court was 41% leased.

Grace Court Mortgage Loan

On October 3, 2017, in connection with the acquisition of Grace Court, the Grace Court Purchaser entered into a loan agreement with an unaffiliated lender for borrowings of up to $34.1 million (the “Grace Court Mortgage Loan”). As of October 3, 2017, $21.9 million had been disbursed with up to $1.3 million available for future disbursements to be used for capital expenditure project expenses and up to $10.9 million available for future disbursements to be used for tenant improvements and leasing expenses, subject to certain terms and conditions contained in the loan documents.

The Grace Court Mortgage Loan matures on October 9, 2020, with three one-year extension options, subject to an extension fee and certain terms and conditions contained in the loan documents. The Grace Court Mortgage Loan bears interest at a floating rate of 405 basis points over one-month LIBOR, but at no point shall the interest rate be less than 5.05%. The Grace Court Joint Venture entered into an interest rate cap that effectively limits one-month LIBOR on the full loan amount at 3.00% effective October 3, 2017 through October 15, 2019. Monthly payments are interest only with the outstanding principal balance, all accrued and unpaid interest and all other amounts due on the maturity date. The Grace Court Purchaser has the right to prepay the loan in full or in part, subject to an exit fee and certain terms and conditions as described in the loan documents.

KBS SOR US Properties II LLC (“SOR US Properties II”) is providing a guaranty of the payment of (i) any losses, damages, costs, claims, fines, suits or other expenses of any kind incurred by the lender (including reasonable attorneys' fees and expenses and court costs) as a result of certain actions or omissions committed by us, the Grace Court Purchaser, SOR US Properties II and/or their affiliates in violation of the loan documents and (ii) the principal balance and any interest or sums outstanding under the Grace Court Mortgage Loan in the event of: the breach of certain covenants in the loan documents by the Grace Court Purchaser; certain prohibited transfers of Grace Court; and certain bankruptcy, insolvency or related proceedings involving the Grace Court Purchaser, the Grace Court Joint Venture, SOR US Properties II and /or their affiliates.

48

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 3. 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. We are also exposed to the effects of foreign currency changes in the Euro with respect to our €2.1 million participating loan facility.  Foreign currency exchange rate risk is the possibility that our financial results could be better or worse than planned because of changes in foreign currency exchange rates. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes and foreign currency 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, 2017, 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, 2017, the fair value and carrying value of our fixed rate real estate loan receivable was $3.5 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, 2017, we were exposed to market risks related to fluctuations in interest rates on $309.4 million of variable rate debt outstanding. Based on interest rates as of September 30, 2017, if interest rates were 100 basis points higher or lower during the 12 months ending September 30, 2018, interest expense on our variable rate debt would increase or decrease by $3.1 million.

The annual effective interest rate of our fixed rate real estate loan receivable as of September 30, 2017 was 11.7%. The effective interest rate represents the effective interest rate as of September 30, 2017, 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, 2017 was 3.9%.  The weighted-average interest rate represents the actual interest rate in effect as of September 30, 2017 (consisting of the contractual interest rate and the effect of interest rate caps, if applicable), using interest rate indices as of September 30, 2017 where applicable.

For a discussion of the interest rate risks related to the current capital and credit markets, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Outlook” herein, and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.

49

PART I. FINANCIAL INFORMATION (CONTINUED)

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

50

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

The following risk factor supplements the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

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, 2016, we paid aggregate distributions of $2.7 million, including $1.1 million distributions paid in cash and $1.6 million of distributions reinvested through our dividend reinvestment plan. Our net loss attributable to common stockholders for the year ended December 31, 2016 was $6.5 million and cash flow provided by operations was $0.7 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $2.0 million of cash flow from operating activities and $0.7 million of debt financing. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments.

For the nine months ended September 30, 2017, we paid aggregate distributions of $2.8 million, including $1.1 million distributions paid in cash and $1.7 million of distributions reinvested through our dividend reinvestment plan. Our net loss attributable to common stockholders for the nine months ended September 30, 2017 was $0.8 million and cash flow provided by operations was $10.4 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $1.8 million of cash flow from operating activities and $1.0 million of debt financing. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments.

From inception through September 30, 2017, we paid cumulative distributions of $6.5 million and our cumulative net loss during the same period was $11.9 million.

51

PART II. OTHER INFORMATION (CONTINUED)

We have a history of operating losses and cannot assure you that we will achieve profitability.

Since our inception in 2013, we have experienced net losses (calculated in accordance with GAAP) for each fiscal year, which have contributed to our cumulative net loss of $11.9 million from inception through September 30, 2017. Our net loss attributable to common stockholders for the nine months ended September 30, 2017 was $0.8 million. Our net loss attributable to common stockholders for the year ended December 31, 2016, and from inception through December 31, 2016 was $6.5 million and $11.1 million, respectively. Our net loss attributable to common stockholders for the year ended December 31, 2015, and from inception through December 31, 2015 was $2.1 million and $4.6 million, respectively. The extent of our future operating losses and the timing of when we will achieve profitability are highly uncertain, and we may never achieve or sustain profitability.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) During the period covered by this Form 10-Q, we sold the following equity securities that were not registered under the Securities Act of 1933. On July 13, 2017, we issued 214,175 of Class A shares of common stock for $9.15 per share (or an aggregate purchase price of $2.0 million) to a business associate of Keith D. Hall and Peter McMillan III. The shares were issued in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933. We did not pay selling commissions or dealer manager fees with respect to this sale. The purchase price reflects a $0.85 discount to the $10.00 per share offering price in our ongoing initial public offering, reflecting that no selling commissions or dealer manager fees were paid on the sale.

b) On August 12, 2014, our Registration Statement on Form S-11 (File No. 333-192331), covering a public offering of up to 100,000,000 shares of common stock in a primary offering and 80,000,000 shares of common stock under our dividend reinvestment plan, was declared effective under the Securities Act of 1933. We commenced our initial public offering on August 12, 2014 upon retaining KBS Capital Markets Group LLC, an affiliate of our advisor, as the dealer manager of our offering. Initially, we were offering 100,000,000 shares of common stock in our primary offering at an aggregate offering price of up to $1.0 billion, or $10.00 per share with discounts available to certain categories of purchasers. The 80,000,000 shares offered under our dividend reinvestment plan were initially being offered at an aggregate offering price of $760 million, or $9.50 per share.

On February 11, 2016, we filed an amended registration statement on Form S-11 with the SEC to add a second class of common stock designated as Class T shares and to designate our currently outstanding common stock as Class A shares. Pursuant to the registration statement, as amended, effective February 17, 2016, 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. 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 the offering. We reserve the right to reallocate shares between the primary offering and our dividend reinvestment plan offering. 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.

Our board of directors has extended the closing date of our ongoing primary initial public offering until the earlier of the sale of up to $650.0 million of shares, or the date the registration statement relating to our proposed follow-on offering (the “Follow-on Offering”) is declared effective by the SEC.

On August 10, 2017, we filed a registration statement on Form S-11 with the SEC to register the Follow-on Offering. Pursuant to the Follow-on Offering registration statement, we propose to register up to $500.0 million of shares of common stock for sale to the public in the primary Follow-on Offering. We also expect to register up to $125.0 million of shares of common stock pursuant to our dividend reinvestment plan in the Follow-on Offering. We can give no assurance that we will commence or complete the Follow-on Offering.

52

PART II. OTHER INFORMATION (CONTINUED)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

As of September 30, 2017, we had sold 10,912,156 and 10,407,804 shares of Class A and Class T common stock, respectively, in our ongoing initial public offering for aggregate gross offering proceeds of $207.1 million in our initial public offering, including 342,508 and 78,227 shares of Class A and Class T common stock, respectively, under our dividend reinvestment plan for aggregate gross offering proceeds of $3.9 million. As of September 30, 2017, we had incurred selling commissions, dealer manager fees and organization and other offering costs in connection with our initial public offering in the amounts set forth below. We pay selling commissions and dealer manager fees to KBS Capital Markets Group, and KBS Capital Markets Group reallows all selling commissions and a portion of the dealer manager fees to participating broker-dealers. In addition, we reimburse KBS Capital Advisors and KBS Capital Markets Group for certain offering expenses as described in our prospectus, as amended and supplemented.

Type of Expense Amount	Amount (in thousands)		Estimated/Actual
Selling commissions and dealer manager fees (1)	$	12,968	Actual
Organization and other offering costs (excluding selling commissions, dealer manager fees and stockholder servicing fees) (2)	2,047		Actual
Total expenses	$	15,015

______________________________________________

⁽¹⁾ Except as described in the “Plan of Distribution” section of our prospectus, as amended and supplemented, 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 portion of our initial public 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 fees 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. As of September 30, 2017, we had recorded approximately $1.5 million in stockholder servicing fees, which is the estimated amount of the stockholder servicing fee payable with respect to all Class T shares sold in the primary portion of our initial public offering as of September 30, 2017.

⁽²⁾ Organization and other offering costs (which exclude selling commissions, dealer manager fees and stockholder servicing fees) are capped at 1.0% of gross offering proceeds from the primary portion of our initial public offering.  KBS Capital Advisors and its affiliates are responsible for any organization and other offering costs related to the primary portion of our initial public offering that exceed this limit.  The amount included above represents our maximum liability for organization and other offering costs based on the 1.0% limit.  As of September 30, 2017, KBS Capital Advisors and its affiliates had incurred an additional $8.2 million in organization and other offering costs on our behalf in connection with our initial public offering.

We expect to use substantially all of the net proceeds from our initial public offering to invest in and manage a diverse portfolio of opportunistic real estate, real estate-related loans, real estate-related debt securities and other real estate-related investments located in the United States and Europe. Such investments will include the acquisition of distressed debt, the origination and acquisition of mortgage, mezzanine, bridge and other real estate-related loans, investment in opportunistic real estate and investments in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. We may also invest in entities that make similar investments.

As of September 30, 2017, we had used the net proceeds from our now terminated private offering and our initial public offering and debt financing to invest $511.6 million in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity, a leasehold interest through a joint venture to develop one retail property and one first mortgage loan, including $12.5 million of acquisition fees and closing costs and origination fees and expenses.

53

PART II. OTHER INFORMATION (CONTINUED)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

c) On July 3, 2013, our board of directors adopted a share redemption program that has been amended at various times thereafter and that may enable stockholders to sell their shares to us in limited circumstances. The terms of the share redemption program described below are the terms as are currently in effect.

Pursuant to the share redemption program there are several limitations on our ability to redeem shares:

• Unless the shares are being redeemed in connection with a stockholder's death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), we may not redeem shares until the stockholder has held the shares for one year.

• During each calendar year, the share redemption program limits the number of shares we may redeem to those that we could purchase with the amount of the net proceeds from the issuance of shares under the dividend reinvestment plan during the prior calendar year. We may, however, increase or decrease the funding available for the redemption of shares pursuant to the program upon ten business days’ notice to our stockholders.

• During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

• We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

Pursuant to the program, as amended, unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability,” or “determination of incompetence” (each as defined in the share redemption program), until June 6, 2017 when we established an estimated net asset value or NAV per share of our common stock, the price at which we redeemed the shares was 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 were initially redeemed at the “net investment amount” per share, which was based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table in our prospectus, as amended and supplemented. For each class of shares, this amount initially equaled $9.01 per share for redemptions of shares received as a result of a stock dividend.

On June 6, 2017, our board of directors approved an estimated NAV per share of our common stock of $9.05. As a result, and unless the shares are being redeemed in connection with a stockholder’s death, qualifying disability, or determination of incompetence, the price at which we 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.

54

PART II. OTHER INFORMATION (CONTINUED)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (continued)

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.

We expect to update our estimated NAV per share annually in December.

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

• There is no one-year holding requirement;

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

• Until we established an estimated NAV per share on June 6, 2017, the redemption price was 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 was based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table in our prospectus for our initial public offering, as amended and supplemented. For each class of shares, this amount initially equaled $9.01 per share for redemptions of shares received as a result of a stock dividend; and

• Once we have established an estimated NAV per share (which occurred in June 6, 2017), the redemption price is the estimated NAV of the shares, as determined by our board of directors.

Upon a transfer of shares any pending redemption requests with respect to such transferred shares will be canceled as of the date we accept the transfer. Stockholders wishing to continue to have a redemption request related to any transferred shares considered by us must resubmit their redemption request.

Our board may amend, suspend or terminate the share redemption program upon 30 days’ notice to stockholders, provided that we may increase or decrease the funding available for the redemption of shares pursuant to the share redemption program upon 10 business days’ notice.

During the nine months ended September 30, 2017, we fulfilled redemption requests and redeemed shares pursuant to the share redemption program as follows:

Month	Total Number of Shares Redeemed	Average Price Paid Per Share (1)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program
January 2017	—	$	—	(2)
February 2017	12,209	$	8.88	(2)
March 2017	11,520	$	9.36	(2)
April 2017	1,706	$	9.15	(2)
May 2017	2,123	$	9.58	(2)
June 2017	5,806	$	8.52	(2)
July 2017	1,195	$	8.37	(2)
August 2017	27,166	$	8.64	(2)
September 2017	10,257	$	8.59	(2)
Total	71,982

_____________________

⁽¹⁾ Pursuant to the program, as amended, we will redeem shares at the purchase prices described above.

⁽²⁾ We limit the dollar value of shares that may be redeemed under the program as described above. During the nine months ended September 30, 2017, we redeemed $0.6 million of common stock, which represented all redemption requests received in good order and eligible for redemption through the September 2017 redemption date. Based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2017 and the $0.5 million set aside for stockholder’s death, qualifying disability or determination of incompetence, we have $1.5 million available for redemptions during the remainder of 2017, subject to the limitations described above.

55

PART II. OTHER INFORMATION (CONTINUED)

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

56

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits

Ex.	Description
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, Commission File no. 333-192331, filed February 16, 2016
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, Commission File no. 333-192331, filed February 16, 2016
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, Commission File no. 333-192331, filed February 16, 2016
4.1	Form of Subscription Agreement, incorporated by reference to Appendix A to the prospectus filed in Post-Effective Amendment no. 10 to the Company’s Registration Statement on Form S-11, Commission File no. 333-192331, filed April 18, 2017
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	Fourth Amended and Restated Dividend Reinvestment Plan adopted May 18, 2017, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed May 24, 2017
4.4	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 on Form S-11, Commission File No. 333-192331, dated February 11, 2016
4.5	Amended and Restated Multiple Class Plan, effective as of May 18, 2017, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 24, 2017
10.1	Assignment and Assumption of Contract of Sale, by and between KBS Capital Advisors and KBS SOR II Oakland City Center, LLC, dated as of July 10, 2017, incorporated by reference to Exhibit 10.58 to the Company's Registration Statement on Form S-11 (No. 333-192331), filed August 10, 2017
10.2	Promissory Note, by KBS SOR II Oakland City Center, LLC for the benefit of Bank of America, National Association, dated August 18, 2017, incorporated by reference to Exhibit 10.60 to Post-Effective Amendment no. 13 to the Company's Registration Statement on Form S-11, Commission File no. 333-192331, filed October 4, 2017
10.3	Loan Agreement, by and between KBS SOR II Oakland City Center, LLC and Bank of America, N.A., dated August 18, 2017, incorporated by reference to Exhibit 10.61 to Post-Effective Amendment no. 13 to the Company's Registration Statement on Form S-11, Commission File no. 333-192331, filed October 4, 2017
10.4	Guaranty Agreement, by KBS SOR US Properties II LLC for the benefit of Bank of America, N.A., dated August 18, 2017, incorporated by reference to Exhibit 10.62 to Post-Effective Amendment no. 13 to the Company's Registration Statement on Form S-11, Commission File no. 333-192331, filed October 4, 2017
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

57

PART II. OTHER INFORMATION (CONTINUED)

Item 6. Exhibits

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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

58

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		KBS STRATEGIC OPPORTUNITY REIT II, INC.
Date:	November 14, 2017	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)
Date:	November 14, 2017	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer, Treasurer and Secretary
			(principal financial officer)

59

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Keith D. Hall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Strategic Opportunity REIT II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 14, 2017	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey K Waldvogel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KBS Strategic Opportunity REIT II, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 14, 2017	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer
			(principal financial officer)

EX-32.1

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KBS Strategic Opportunity REIT II, Inc. (the “Registrant”) for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Keith D. Hall, Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	November 14, 2017	By:	/S/ KEITH D. HALL
			Keith D. Hall
			Chief Executive Officer and Director
			(principal executive officer)

EX-32.2

Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350,

as Adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of KBS Strategic Opportunity REIT II, Inc. (the “Registrant”) for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey K. Waldvogel, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	November 14, 2017	By:	/S/ JEFFREY K. WALDVOGEL
			Jeffrey K. Waldvogel
			Chief Financial Officer
			(principal financial officer)

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 09, 2017
Entity Listings [Line Items]
Entity Registrant Name	KBS Strategic Opportunity REIT II, Inc.
Entity Central Index Key	0001580673
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		16,542,777
Class T
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		10,839,223

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Real estate, net	$ 498,708	$ 317,323
Real estate loan receivable, net	3,500	3,442
Total real estate and real estate-related investments, net	502,208	320,765
Cash and cash equivalents	36,867	43,741
Restricted cash	10,740	3,385
Investment in unconsolidated entity	2,658	2,385
Rents and other receivables	2,184	2,388
Above-market leases, net	16	21
Prepaid expenses and other assets	5,589	10,529
Total assets	560,262	383,214
Liabilities and equity
Notes payable, net	305,878	208,581
Accounts payable and accrued liabilities	8,257	7,101
Due to affiliates	5,963	812
Distributions payable	341	274
Below-market leases, net	11,842	949
Other liabilities	11,426	3,408
Total liabilities	343,707	221,125
Commitments and contingencies (Note 12)
Redeemable common stock	3,208	2,121
Equity
Preferred stock, $.01 par value per share; 10,000,000 shares authorized, no shares issued and outstanding	0	0
Additional paid-in capital	235,498	176,021
Cumulative distributions and net losses	(34,913)	(27,817)
Accumulated other comprehensive income (loss)	162	(111)
Total KBS Strategic Opportunity REIT II, Inc. stockholders’ equity	201,016	148,294
Noncontrolling interests	12,331	11,674
Total equity	213,347	159,968
Total liabilities and equity	560,262	383,214
Class A
Equity
Common stock	163	140
Class T
Equity
Common stock	$ 106	$ 61

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Class A
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	16,296,767	14,074,793
Common stock, shares outstanding (in shares)	16,296,767	14,074,793
Class T
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	10,624,216	6,046,591
Common stock, shares outstanding (in shares)	10,624,216	6,046,591

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Hotel revenues	$ 12,160	$ 8,599	$ 23,473	$ 20,563
Office revenues	4,218	1,892	7,824	3,289
Apartment revenues	1,746	0	5,184	0
Interest income from real estate loans receivable	103	101	303	298
Total revenues	18,227	10,592	36,784	24,150
Expenses:
Hotel expenses	5,807	5,157	14,839	13,466
Office expenses	1,536	521	2,713	860
Apartment expenses	1,026	0	2,724	0
Asset management fees to affiliate	739	359	1,820	908
Real estate acquisition fees and expenses to affiliate	0	0	0	1,341
Real estate acquisition fees and expenses	0	0	0	123
General and administrative expenses	1,146	646	2,492	2,073
Depreciation and amortization	3,709	2,314	9,176	5,299
Interest expense	2,255	931	5,798	2,379
Total expenses	16,218	9,928	39,562	26,449
Other income:
Other interest income	178	75	467	132
Equity in income of unconsolidated entity	14	58	40	58
Casualty-related income	1,614	0	1,614	0
Total other income	1,806	133	2,121	190
Net income (loss) before income taxes	3,815	797	(657)	(2,109)
Income tax (expense) benefit	(431)	(48)	5	(33)
Net income (loss)	3,384	749	(652)	(2,142)
Net income attributable to noncontrolling interests	(491)	(148)	(182)	(160)
Net income (loss) attributable to common stockholders	2,893	601	(834)	(2,302)
Class A
Other income:
Net income (loss) attributable to common stockholders	$ 1,905	$ 499	$ (126)	$ (2,188)
Net income (loss) per common share, basic and diluted (in dollars per share)	$ 0.12	$ 0.04	$ (0.01)	$ (0.18)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	16,166,468	13,219,633	15,410,820	12,357,932
Class T
Other income:
Net income (loss) attributable to common stockholders	$ 988	$ 102	$ (708)	$ (114)
Net income (loss) per common share, basic and diluted (in dollars per share)	$ 0.09	$ 0.04	$ (0.08)	$ (0.10)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	10,482,688	2,538,705	9,107,916	1,109,835

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 3,384	$ 749	$ (652)	$ (2,142)
Other comprehensive income:
Foreign currency translation gain	82	27	273	40
Total other comprehensive income	82	27	273	40
Total comprehensive income (loss)	3,466	776	(379)	(2,102)
Total comprehensive income attributable to noncontrolling interests	(491)	(148)	(182)	(160)
Total comprehensive income (loss) attributable to common stockholders	$ 2,975	$ 628	$ (561)	$ (2,262)

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CONSOLIDATED STATEMENTS OF EQUITY (unaudited) - USD ($) $ in Thousands	Total	Class A	Class T	Total Stockholders’ Equity	Common Stock Class A	Common Stock Class T	Additional Paid-in Capital	Cumulative Distributions and Net Losses	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
Balance (in shares) at Dec. 31, 2015					9,619,143	0
Balance at Dec. 31, 2015	$ 70,742			$ 66,452	$ 96	$ 0	$ 79,622	$ (13,266)	$ 0	$ 4,290
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(6,495)			(6,490)				(6,490)		(5)
Other comprehensive income (loss)	(111)			(111)					(111)
Issuance of common stock (in shares)					4,104,345	5,955,697
Issuance of common stock	97,409			97,409	$ 41	$ 60	97,308
Stock distribution declared (in shares)					422,829	90,894
Stock distribution declared	0				$ 4	$ 1	5,095	(5,100)
Redemptions of common stock (in shares)					(71,524)
Redemptions of common stock	(591)			(591)	$ (1)		(590)
Transfers to redeemable common stock	(1,029)			(1,029)			(1,029)
Distributions declared	(2,961)			(2,961)				(2,961)
Commissions on stock sales, dealer manager fees and stockholder servicing fees to affiliate	(6,213)			(6,213)			(6,213)
Reduction of other offering costs	1,828			1,828			1,828
Noncontrolling interests contributions	7,389									7,389
Balance (in shares) at Dec. 31, 2016		14,074,793	6,046,591		14,074,793	6,046,591
Balance at Dec. 31, 2016	159,968			148,294	$ 140	$ 61	176,021	(27,817)	(111)	11,674
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income	(652)			(834)				(834)		182
Other comprehensive income (loss)	273			273					273
Issuance of common stock (in shares)					2,062,259	4,452,107
Issuance of common stock	62,683			62,683	$ 21	$ 45	62,617
Stock distribution declared (in shares)					226,399	130,816
Stock distribution declared	0				$ 3	$ 1	3,411	(3,415)
Redemptions of common stock (in shares)					(66,684)	(5,298)
Redemptions of common stock	(634)			(634)	$ (1)	$ (1)	(632)
Transfers to redeemable common stock	(1,087)			(1,087)			(1,087)
Distributions declared	(2,847)			(2,847)				(2,847)
Commissions on stock sales, dealer manager fees and stockholder servicing fees to affiliate	(4,249)			(4,249)			(4,249)
Other offering costs	(583)			(583)			(583)
Noncontrolling interests contributions	500									500
Distributions to noncontrolling interests	(25)									(25)
Balance (in shares) at Sep. 30, 2017		16,296,767	10,624,216		16,296,767	10,624,216
Balance at Sep. 30, 2017	$ 213,347			$ 201,016	$ 163	$ 106	$ 235,498	$ (34,913)	$ 162	$ 12,331

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Cash Flows from Operating Activities:
Net loss	$ 3,384	$ 749	$ (652)	$ (2,142)	$ (6,495)
Adjustment to reconcile net loss to net cash provided by operating activities
Equity in income of unconsolidated entity	(14)	(58)	(40)	(58)
Distribution of earnings from unconsolidated joint venture			40	0
Casualty-related income			(1,614)	0
Depreciation and amortization	3,709	2,314	9,176	5,299
Noncash interest income on real estate-related investment			(58)	(52)
Deferred rents			(319)	(172)
Bad debt expense			425	0
Amortization of above- and below-market leases, net			(974)	(285)
Amortization of deferred financing costs			612	384
Unrealized loss on derivative instruments			117	43
Changes in operating assets and liabilities:
Rents and other receivables			(499)	(1,737)
Prepaid expenses and other assets			2,444	(845)
Accounts payable and accrued liabilities			509	1,594
Due to affiliates			23	(10)
Other liabilities			1,176	2,213
Net cash provided by operating activities			10,366	4,232
Cash Flows from Investing Activities:
Acquisition of real estate			(154,719)	(51,341)
Improvements to real estate			(7,830)	(14,298)
Investment in unconsolidated entity			0	(2,486)
Payments for construction in progress			(4,103)	0
Escrow deposits for future real estate purchases			(1,000)	(3,000)
Proceeds from insurance claim			5,080	0
Net cash used in investing activities			(162,572)	(71,125)
Cash Flows from Financing Activities:
Proceeds from notes payable			97,374	45,500
Payments of deferred financing costs			(1,225)	(492)
Proceeds from issuance of common stock			61,559	69,735
Payments to redeem common stock			(634)	(40)
Payments of commissions on stock sales, dealer manager fees and stockholder servicing fees			(3,803)	(4,303)
Payments of other offering costs			0	(20)
Distributions paid			(1,059)	(434)
Noncontrolling interest contributions			500	515
Distributions to noncontrolling interest			(25)	0
Net cash provided by financing activities			152,687	110,461
Net increase in cash, cash equivalents and restricted cash			481	43,568
Cash, cash equivalents and restricted cash, beginning of period			47,126	25,366	25,366
Cash, cash equivalents and restricted cash, end of period	$ 47,607	$ 68,934	47,607	68,934	$ 47,126
Supplemental Disclosure of Noncash Investing and Financing Activities:
Interest paid, net of capitalized interest of $2,985 and $126 for the nine months ended September 30, 2017 and 2016, respectively			4,062	1,788
Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan			1,721	664
Increase in accrued improvements to real estate			134	0
Increase in other offering costs due to affiliates			583	157
Increase in acquisition fees due to affiliates			4,099	166
Reversal of accrued organization and offering expenses due to affiliates			0	(2,222)
Increase in stockholder servicing fees due to affiliate			0	1,474
Stock dividends issued			3,415	1,685
Increase in distributions payable			67	1,078
Foreign currency translation gain on investment in unconsolidated entity			273	40
Increase in construction in progress payable			$ 403	$ 0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Interest capitalized	$ 1,300	$ 54	$ 2,985	$ 126

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ORGANIZATION

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

ORGANIZATION

KBS Strategic Opportunity REIT II, Inc. (the “Company”) was formed on February 6, 2013 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2014 and intends to continue to operate in such a manner. The Company’s business is conducted through KBS Strategic Opportunity Limited Partnership II (the “Operating Partnership”), a Delaware limited partnership formed on February 7, 2013. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Strategic Opportunity Holdings II LLC (“REIT Holdings”), a Delaware limited liability company formed on February 7, 2013, owns the remaining 99.9% partnership interest in the Operating Partnership and is the sole limited partner. The Company is the sole member and manager of REIT Holdings. The Company has three wholly owned taxable REIT subsidiaries (“TRS”), two of which lease the Company’s hotel properties and in turn contract with independent hotel management companies that manage the day-to-day operations of the Company’s hotels; the third consolidates the Company’s wholly owned TRSs.  The Company’s TRSs are subject to federal and state income tax at regular corporate tax rates.

Subject to certain restrictions and limitations, the business of the Company has been externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, since July 2013 pursuant to an advisory agreement (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of real estate loans, opportunistic real estate, and other real estate-related investments. The Advisor has entered into a sub-advisory agreement with STAM, a real estate operating company to provide real estate acquisition and portfolio management services to the Advisor in connection with any investments the Company may make in value-added real estate, distressed debt, and real estate-related investments in Europe. On July 3, 2013, the Company issued 21,739 shares of its common stock to the Advisor at a purchase price of $9.20 per share.

The Company expects to invest in and manage a diverse portfolio of opportunistic real estate, real estate-related loans, real estate-related debt securities and other real estate-related investments located in the United States and Europe. Such investments may include the acquisition of distressed debt, the origination and acquisition of mortgage, mezzanine, bridge and other real estate-related loans, investment in opportunistic real estate and investments in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. The Company may also invest in entities that make similar investments. As of September 30, 2017, the Company had invested in two hotel properties, three office properties, one apartment building, an investment in an unconsolidated entity and one first mortgage loan. Additionally as of September 30, 2017, the Company had entered into a joint venture to develop one retail property, which is currently under construction.

From July 3, 2013 to August 11, 2014, the Company conducted a private placement offering (the “Private Offering”) exempt from registration under Regulation D of the Securities Act of 1933, as amended (the “Act”). The Company sold 3,619,851 shares of common stock for gross offering proceeds of $32.2 million in the Private Offering.

On November 14, 2013, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to offer a maximum of 180,000,000 shares of common stock for sale to the public (the “Public Offering”), of which 100,000,000 shares were registered in a primary offering and 80,000,000 shares were registered to be sold under the Company’s dividend reinvestment plan. The SEC declared the Company’s registration statement effective on August 12, 2014. On February 11, 2016, the Company filed an amended registration statement on Form S-11 with the SEC to offer a second class of common stock designated as Class T shares and to designate its initially offered and outstanding common stock as Class A shares. Pursuant to the amended registration statement, the Company is offering to sell any combination of Class A and Class T shares in the Public Offering but in no event may the Company sell more than 180,000,000 of shares of its common stock pursuant to the Public Offering. The Company commenced offering Class T shares of common stock for sale to the public on February 17, 2016. KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, serves as the dealer manager of the Public Offering pursuant to a dealer manager agreement originally dated August 12, 2014 and amended and restated February 17, 2016 (the “Dealer Manager Agreement”). Previously the Dealer Manager served as dealer manager for the Private Offering. The Dealer Manager is responsible for marketing the Company’s shares.

The Company’s board of directors has extended the closing date of the primary offering until the earlier of the sale of up to $650.0 million of shares, or the date the registration statement relating to the Company’s proposed follow-on offering (the “Follow-on Offering”) is declared effective by the SEC.

On August 10, 2017, the Company filed a registration statement on Form S-11 with the SEC to register the Follow-on Offering. Pursuant to the Follow-on Offering registration statement, the Company proposes to register up to $500.0 million of shares of common stock for sale to the public in the primary portion of the Follow-on Offering. The Company also expects to register up to $125.0 million of shares of common stock pursuant to the Company’s dividend reinvestment plan in the Follow-on Offering. The Company can give no assurance that it will commence or complete the Follow-on Offering.

On January 7, 2015, the Company broke escrow in the Public Offering and through September 30, 2017, the Company had sold 10,912,156 and 10,407,804 shares of Class A and Class T common stock, respectively, in the Public Offering for aggregate gross offering proceeds of $207.1 million, including 342,508 and 78,227 shares of Class A and Class T common stock, respectively, under its dividend reinvestment plan for aggregate gross offering proceeds of $3.9 million. Also as of September 30, 2017, the Company had redeemed 138,208 and 5,298 shares of Class A and Class T common stock, respectively, for $1.2 million.

On each of April 2, 2014 and July 31, 2014, the Company issued 120,106 shares of Class A common stock to Willowbrook Capital Group LLC, an entity owned and controlled by Keith D. Hall, one of the Company’s directors and the Company’s Chief Executive Officer, and Peter McMillan III, also one of the Company’s directors and the Company’s President, for $1.0 million. On July 14, 2017, the Company issued 214,175 shares of Class A common stock to a business associate of Keith D. Hall and Peter McMillan III for $2.0 million. 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.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016, except for the adoption of ASU No. 2017-01 on January 1, 2017. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the SEC.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries and joint ventures in which the Company has a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation.  These reclassifications have not changed the results of operations of prior periods. During the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

Segments

The Company has invested in opportunistic real estate investments and originated a loan secured by a non-stabilized real estate asset. In general, the Company intends to hold its investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, the Company’s management views opportunistic real estate and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate and other real estate-related assets, and therefore, the Company currently aggregates its operating segments into one reportable business segment. In addition, the Company has invested in a participating loan facility secured by a portfolio of light industrial properties located in Europe. However, based on the Company's investment portfolio and future investment focus, the Company does not believe that its investment in the European asset is a reportable segment.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding for each class of share outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2017 and 2016. For the purpose of determining the weighted-average number of shares outstanding, stock dividends issued are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

The Company’s board of directors has declared and issued stock dividends on shares of the Company’s common stock during the three and nine months ended September 30, 2017 and 2016 as follows:

Three Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.005001 shares	71,656
2017	0.005001 shares	131,477

Nine Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.015002 shares	168,866
2017	0.015003 shares	357,215

_____________________

⁽¹⁾ Amount declared per share outstanding includes one-time stock dividends, quarterly dividends and monthly dividends and assumes each share was issued and outstanding for the entire periods presented. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend.

Until the Company established an estimated net asset value, on June 6, 2017, per share of common stock, for the purpose of calculating the dollar amount of the Class A and Class T stock dividends issued, the Company used the current Class A and Class T primary offering price.

Cash distributions declared per share of Class A common stock were $0.048 and $0.143 for the three and nine months ended September 30, 2017, respectively. Cash distributions declared per share of Class T common stock were $0.025 and $0.073 for the three and nine months ended September 30, 2017, respectively. The declared rate of cash distributions for Class T Shares is different than the rate declared for the Class A Shares by an amount equivalent to any applicable daily stockholder servicing fees. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date during the three and nine months ended September 30, 2017. Each day during the period from January 1, 2017 through September 30, 2017 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period 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.

Cash distributions declared per share of Class A common stock were $0.098 and $0.154 for the three and nine months ended September 30, 2016, respectively. Cash distributions declared per share of Class T common stock were $0.074 and $0.098 for the three and nine months ended September 30, 2016. The declared rate of cash distributions for Class T Shares is different than the rate declared for the Class A Shares by an amount equivalent to any applicable daily stockholder servicing fees. Distributions declared per share of common stock assumes each share was issued and outstanding each day that was a record date during the three and nine months ended September 30, 2016. Each day during the period from March 1, 2016 through March 31, 2016 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period at a rate of (i) $0.00026202 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. Each day during the period from April 1, 2016 through September 30, 2016 was a record date for distributions. Distributions for this period were calculated based on stockholders of record each day during this period 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. Given the distribution rate declared for the period and the applicable 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 1, 2016 to March 31, 2016. On September 27, 2016, the Company’s 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 common stock to stockholders of record as of the close of business on September 27, 2016.

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common stock during the periods presented.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Net income (loss) attributable to common stockholders	$	2,893	$	601		$	(834	)	$	(2,302	)
Less: Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Less: Class T Common Stock cash distributions declared	258		249			660			254
Undistributed net income (loss) attributable to common stockholders	$	1,858	$	(912	)	$	(3,681	)	$	(4,478	)
Class A Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	1,128	$	(765	)	$	(2,313	)	$	(4,110	)
Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Net income (loss) attributable to Class A common stockholders	$	1,905	$	499		$	(126	)	$	(2,188	)
Net income (loss) per common share, basic and diluted	$	0.12	$	0.04		$	(0.01	)	$	(0.18	)
Weighted-average number of common shares outstanding, basic and diluted	16,166,468		13,219,633			15,410,820			12,357,932
Class T Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	730	$	(147	)	$	(1,368	)	$	(368	)
Class T Common Stock cash distributions declared	258		249			660			254
Net income (loss) attributable to Class T common stockholders	$	988	$	102		$	(708	)	$	(114	)
Net income (loss) per common share, basic and diluted	$	0.09	$	0.04		$	(0.08	)	$	(0.10	)
Weighted-average number of common shares outstanding, basic and diluted	10,482,688		2,538,705			9,107,916			1,109,835

Square Footage, Occupancy and Other Measures

 Any references to square footage, occupancy or annualized base rent are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The Company is in the process of identifying the Company’s revenue streams that are impacted by the adoption of ASC 606. The Company has preliminarily identified revenues that may be impacted by this standard, which includes hotel revenues (comprised of room, food, beverage, convention services, and miscellaneous revenues), and other ancillary income earned at its properties. The Company’s revenues generated through leasing arrangements are excluded from this standard. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.   ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); and (d) Relating to distributions received from equity method investments, ASU No. 2016-15 provides an accounting policy election for classifying distributions received from equity method investments. Such amounts can be classified using a (1) cumulative earnings approach, or (2) nature of distribution approach. Under the cumulative earnings approach, an investor would compare the distributions received to its cumulative equity method earnings since inception.  Any distributions received up to the amount of cumulative equity earnings would be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Alternatively, an investor can choose to classify the distributions based on the nature of activities of the investee that generated the distribution. If the necessary information is subsequently not available for an investee to determine the nature of the activities, the entity should use the cumulative earnings approach for that investee and report a change in accounting principle on a retrospective basis; (e) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected to early adopt ASU No. 2016-18 for the reporting period ending December 31, 2016 and was applied retrospectively. As a result of adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”) to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  ASU No. 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.  If the screen is not met, ASU No. 2017-01 (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements.  ASU No. 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs.  Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.  ASU No. 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The amendments can be applied to transactions occurring before the guidance was issued (January 5, 2017) as long as the applicable financial statements have not been issued.  The Company elected to early adopt ASU No. 2017-01 for the reporting period beginning January 1, 2017.  As a result of adoption of ASU No. 2017-01, the Company’s acquisitions of investment properties beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations).  Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.

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RECENT ACQUISITION OF REAL ESTATE

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

RECENT ACQUISITION OF REAL ESTATE

RECENT ACQUISITION OF REAL ESTATE

During the nine months ended September 30, 2017, the Company acquired the following property (in thousands):

								Intangibles
Property Name	City	State	Acquisition Date	Land		Building and Improvements		Tenant Origination  and Absorption Costs		Above-Market Lease Assets		Below-Market Lease Liabilities			Total Purchase Price
Oakland City Center	Oakland	CA	08/18/2017	$	22,150	$	136,544	$	11,951	$	—	$	(11,872	)	$	158,773

The intangible assets and liabilities acquired in connection with this acquisition have weighted-average amortization periods as of the date of acquisition as follows (in years):

	Tenant Origination and Absorption Costs	Above-Market Lease Assets	Below-Market Lease Liabilities
Oakland City Center	4.8	—	4.7

The Company recorded this acquisition as an asset acquisition. Included in the total purchase price above was $5.5 million of capitalized acquisition costs. For the nine months ended September 30, 2017, the Company recognized $2.4 million of total revenues and $1.2 million of operating expenses from this property.

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REAL ESTATE

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

REAL ESTATE

REAL ESTATE

As of September 30, 2017, the Company’s real estate portfolio was composed of two hotel properties, three office properties and one apartment building. In addition, the Company has entered into a joint venture to develop one retail property, which is currently under construction. The following table summarizes the Company’s real estate as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017			December 31, 2016
Land	$	93,598		$	71,448
Buildings and improvements	340,391			196,050
Construction in progress	62,246			50,452
Tenant origination and absorption costs	16,471			6,226
Total real estate, cost	512,706			324,176
Accumulated depreciation and amortization	(13,998		)	(6,853		)
Total real estate, net	$	498,708		$	317,323

The following table provides summary information regarding the Company’s real estate as of September 30, 2017 (in thousands):

Property	Date Acquired	City	State	Property Type	Land		Building and Improvements(1)		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net		Ownership %
Springmaid Beach Resort	12/30/2014	Myrtle Beach	SC	Hotel	$	27,438	$	30,821	$	—	$	58,259	$	(3,617	)	$	54,642	90.0%
Q&C Hotel	12/17/2015	New Orleans	LA	Hotel	1,232		52,921		—		54,153		(3,301		)	50,852		90.0%
2200 Paseo Verde	12/23/2015	Henderson	NV	Office	1,850		11,412		603		13,865		(957		)	12,908		100.0%
Lincoln Court	05/20/2016	Campbell	CA	Office	14,706		33,711		3,917		52,334		(3,221		)	49,113		100.0%
Lofts at NoHo Commons	11/16/2016	North Hollywood	CA	Apartment	26,222		74,902		—		101,124		(1,648		)	99,476		90.0%
210 West 31st Street (2)	12/01/2016	New York	NY	Retail	—		62,246		—		62,246		—			62,246		80.0%
Oakland City Center	08/18/2017	Oakland	CA	Office	22,150		136,624		11,951		170,725		(1,254		)	169,471		100.0%
					$	93,598	$	402,637	$	16,471	$	512,706	$	(13,998	)	$	498,708

_____________________

⁽¹⁾ Building and improvements includes construction in progress.

⁽²⁾ The Company acquired the rights to a leasehold interest with respect to this property. The leasehold interest expires January 31, 2114. As of September 30, 2017, the capital lease had a carrying value of $7.1 million included in construction in progress.

Hotel Properties

As of September 30, 2017, the Company owned two hotel properties. The following table provides detail information regarding the Company's hotel revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Hotel revenues:
Room	$	4,973	6,499		$	13,304	15,180
Food, beverage and convention services	1,031		883		2,785		2,436
Campground	288		275		838		806
Other (1)	5,868		942		6,546		2,141
Hotel revenues	$	12,160	$	8,599	$	23,473	$	20,563
Hotel expenses:
Room	$	1,391	1,500		$	3,604	3,787
Food, beverage and convention services	868		842		2,381		2,188
General and administrative	601		590		1,748		1,696
Sales and marketing	690		453		2,058		1,236
Repairs and maintenance	454		485		1,350		1,345
Utilities	325		324		777		767
Property taxes and insurance	867		348		1,650		1,050
Other	611		615		1,271		1,397
Hotel expenses	$	5,807	$	5,157	$	14,839	$	13,466

_____________________

⁽¹⁾ Hotel revenues - other includes $5.5 million and $5.8 million of business interruption insurance recovery for the three and nine months ended September 30, 2017, respectively.

Springmaid Beach Resort

Springmaid Beach Resort sustained significant damage from Hurricane Matthew in October 2016, which resulted in a number of rooms being offline through September 30, 2017. The pier was destroyed and certain restaurants and stores have been closed. The Company’s insurance policy provides coverage for property damage and business interruption subject to a deductible of up to 3% of replacement cost per incident. Based on management’s estimates, the Company recognized an estimated aggregate loss for the damaged assets' net book value of $3.7 million during the year ended December 31, 2016, which was reduced by $3.7 million of estimated insurance recovery since the Company determined that it was probable of receipt. While the Company's insurance recovery is subject to a deductible, the Company did not recognize a loss as the estimated insurance recovery based on fair value (or replacement cost) exceeds the net book value of the damaged assets plus the deductible amount, which is estimated to be approximately $2.5 million.

As of December 31, 2016, the Company recorded a receivable of $6.2 million for estimated insurance recoveries as prepaid expenses and other assets on the accompanying consolidated balance sheets related to the damages mentioned above. In September 2017, the Company reached a final settlement with the insurance company. The Company received $8.2 million for the property damages sustained as a result of Hurricane Matthew during the nine months ended September 30, 2017. During the three and nine months ended September 30, 2017, the Company received $5.5 million and $5.8 million of business interruption insurance recovery, respectively, which is included in hotel revenues on the accompanying consolidated statements of operations. As a result of the settlement, the Company recorded a $1.6 million gain for casualty-related income, net on the accompanying consolidated statements of operations.

To the extent that insurance proceeds ultimately exceeded the difference between replacement cost and net book value of the impaired assets, the post-hurricane costs incurred, and/or business interruption losses recognized, the excess was reflected as income in the period those amounts were received or when receipt was deemed probable to occur.

Office Properties

As of September 30, 2017, the Company owned three office properties encompassing in the aggregate 551,380 rentable square feet which were 90% occupied. The following table provides detailed information regarding the Company's office revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Office revenues:
Rental income	$	3,983	$	1,817	$	7,406	$	3,165
Tenant reimbursements and other income	235		75		418		124
Office revenues	$	4,218	$	1,892	$	7,824	$	3,289
Office expenses:
Operating, maintenance, and management	$	1,094	$	328	$	1,890	$	552
Real estate taxes and insurance	442		193		823		308
Office expenses	$	1,536	$	521	$	2,713	$	860

Operating Leases

The Company’s office properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2017, the leases had remaining terms, excluding options to extend, of up to 10.9 years with a weighted-average remaining term of 3.5 years. Some of the leases may have provisions to extend the term of the lease, options for early termination for all or a part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to office tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $1.0 million and $0.7 million as of September 30, 2017 and December 31, 2016, respectively.

As of September 30, 2017, the future minimum rental income from the Company’s office properties under its non-cancelable operating leases was as follows (in thousands):

October 1, 2017 through December 31, 2017	$	4,607
2018	17,512
2019	15,577
2020	12,193
2021	9,383
Thereafter	19,912
	$	79,184

Apartment Property

As of September 30, 2017, the Company owned one apartment property with 292 units which was 94% occupied. The following table provides detailed information regarding the Company's apartment revenues and expenses for the three and nine months ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Apartment revenues:
Rental income	$	1,638	$	4,856
Tenant reimbursements and other income	108		328
Apartment revenues	$	1,746	$	5,184
Apartment expenses:
Operating, maintenance, and management	$	683	$	1,704
Real estate taxes and insurance	343		1,020
Apartment expenses	$	1,026	$	2,724

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

9 Months Ended

Sep. 30, 2017

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES

As of September 30, 2017 and December 31, 2016, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Cost	$	16,471		$	6,226		$	27		$	27		$	(13,081	)	$	(1,445	)
Accumulated Amortization	(2,424		)	(1,553		)	(11		)	(6		)	1,239			496
Net Amount	$	14,047		$	4,673		$	16		$	21		$	(11,842	)	$	(949	)

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended September 30,						For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(865	)	$	(627	)	$	(2	)	$	(3	)	$	647	$	200

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(2,578	)	$	(1,055	)	$	(5	)	$	(15	)	$	979	$	300

Additionally, as of September 30, 2017 and December 31, 2016, the Company had recorded unamortized housing subsidy intangible asset which is included in prepaid expenses and other assets in the accompanying balance sheets, of $2.5 million, which is amortized on a straight line basis over 31.8 years. During the three and nine months ended September 30, 2017, the Company recorded amortization expense of $20,000 and $60,000, respectively, related to the housing subsidy intangible asset.

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REAL ESTATE LOAN RECEIVABLE

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

REAL ESTATE LOAN RECEIVABLE

REAL ESTATE LOAN RECEIVABLE

As of September 30, 2017 and December 31, 2016, the Company had originated one real estate loan receivable as follows (in thousands):

Loan Name Location of Related Property or Collateral

Date Originated

Property Type

Loan Type

Outstanding Principal Balance as of September 30, 2017

Book Value as of September 30, 2017 (1)

Book Value as of December 31, 2016 (1)

Contractual Interest Rate (2)

Annualized Effective Interest Rate (2)

Maturity Date

655 Summer Street First Mortgage

Boston, Massachusetts

09/04/2014

Office

Mortgage

$

3,500

$

3,500

$

3,442

9.25%

11.68%

10/01/2017 (3)

_____________________

⁽¹⁾ Book value of the real estate loan receivable represents outstanding principal balance adjusted for unamortized origination fees and direct origination and acquisition costs.

⁽²⁾ 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 2017, using the interest method annualized (if applicable) and 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, 2017.

⁽³⁾ Subsequent to September 30, 2017, the maturity date of the 655 Summer Street First Mortgage was extended to January 1, 2018.

The following summarizes the activity related to the real estate loan receivable for the nine months ended September 30, 2017 (in thousands):

Real estate loan receivable - December 31, 2016	$	3,442
Amortization of closing costs and origination fees on real estate loan receivable	58
Real estate loan receivable - September 30, 2017	$	3,500

For the three and nine months ended September 30, 2017 and 2016, interest income from the real estate loan receivable consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Contractual interest income	$	83	$	83	$	245	$	246
Amortization of closing costs and origination fees, net	20		18		58		52
Interest income from real estate loan receivable	$	103	$	101	$	303	$	298

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INVESTMENT IN UNCONSOLIDATED ENTITY

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENT IN UNCONSOLIDATED ENTITY

INVESTMENT IN UNCONSOLIDATED ENTITY

On June 28, 2016, the Company originated a participating loan facility in an amount up to €2.6 million ($2.9 million at closing). The Company funded approximately €2.1 million ($2.3 million at closing). The proceeds were used by STAM 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, the Company participates 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, the Company also capitalized an additional $0.2 million of acquisition costs and fees. During the three and nine months ended September 30, 2017, the Company recognized $14,000 and $40,000, respectively, of income with respect to this investment. During the three and nine months ended September 30, 2016, the Company recognized $58,000 of income with respect to this investment.

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NOTE PAYABLE

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

NOTE PAYABLE

NOTES PAYABLE

As of September 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (in thousands):

	Book Value as of September 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate (1)	Effective Interest Rate (1)	Payment Type	Maturity Date
Springmaid Beach Resort Mortgage Loan	$	38,000		$	38,000		One-month LIBOR + 3.00%	4.24%	Interest Only	12/30/2017
Q&C Hotel Mortgage Loan	28,330			28,330			One-month LIBOR + 3.25%	4.49%	Interest Only(2)	12/17/2018
2200 Paseo Verde Mortgage Loan(3)	7,947			7,430			One-month LIBOR + 2.25%	3.49%	Interest Only(3)	07/01/2020
Lincoln Court Mortgage Loan	33,500			33,500			One-month LIBOR + 1.75%	2.99%	Interest Only	06/01/2020
Lofts at NoHo Commons Mortgage Loan	72,100			72,100			One-month LIBOR + 2.66%	3.89%	Interest Only	12/01/2019
210 West 31st Street Mortgage Loan(4)	35,007			32,650			One-month LIBOR + 5.50%	6.74%	Interest Only	12/01/2019
Oakland City Center Mortgage Loan(5)	94,500			—			One-month LIBOR + 1.75%	2.99%	Interest Only(5)	09/01/2022
Total notes payable principal outstanding	309,384			212,010
Deferred financing costs, net	(3,506		)	(3,429		)
Total notes payable, net	$	305,878		$	208,581

_____________________

⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2017. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2017 (consisting of the contractual interest rate, contractual floor rates and the effects of interest rate caps, if applicable), using interest rate indices at September 30, 2017, where applicable.

⁽²⁾ Beginning 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.

⁽³⁾ As of September 30, 2017, $7.9 million had been disbursed to the Company and up to $1.6 million is available for future disbursements to be used for tenant improvement costs, capital improvements costs and leasing commissions, subject to certain terms and conditions contained in the loan documents. Beginning August 1, 2019, monthly payments include principal amortization payments of $10,000 per month.

⁽⁴⁾ As of September 30, 2017, $35.0 million had been disbursed to the Company and up to $12.1 million is 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.

⁽⁵⁾ See “Recent Financing Transaction – Oakland City Center Mortgage Loan.”

During the three and nine months ended September 30, 2017, the Company incurred $2.3 million and $5.8 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2017 was $0.4 million and $1.1 million, respectively, of amortization of deferred financing costs. Interest expense incurred as a result of the Company’s interest rate cap agreement was $12,000 and $84,000 for the three and nine months ended September 30, 2017, respectively. Additionally, during the three and nine months ended September 30, 2017, the Company capitalized $1.3 million and $3.0 million, respectively, of interest related to its redevelopment project at 210 West 31st Street. During the three and nine months ended September 30, 2016, the Company incurred $0.9 million and $2.4 million, respectively, of interest expense. Included in interest expense for the three and nine months ended September 30, 2016 was $0.1 million and $0.4 million, respectively, of amortization of deferred financing costs. Interest expense incurred as a result of the Company’s interest rate cap agreement was $1,000 and $43,000 for the three and nine months ended September 30, 2016, respectively. Additionally, during the three and nine months ended September 30, 2016, the Company capitalized $54,000 and $126,000, respectively, of interest related to its redevelopment projects at Springmaid Beach Resort. As of September 30, 2017 the Company’s deferred financing costs were $3.6 million, of which $3.5 million, net of amortization, was included in notes payable, net and $0.1 million was included in prepaid and other assets on the accompanying balance sheets. As of December 31, 2016, the Company’s deferred financing costs were $3.4 million, net of amortization, and are included in notes payable, net on the accompanying consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the Company’s interest payable was $1.0 million and $0.7 million, respectively.

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2017 (in thousands):

October 1, 2017 through December 31, 2017	$	38,000
2018	28,330
2019	107,157
2020	41,727
2021	1,320
Thereafter	92,850
	$	309,384

The Company’s notes payable contain financial and non-financial debt covenants. As of September 30, 2017, the Company was in compliance with all debt covenants.

The Company’s note payable with respect to the Springmaid Beach Resort Mortgage Loan requires the Company to maintain a minimum working capital reserve in an amount sufficient to fund the working capital requirements of the Springmaid Beach Resort through the off-peak season, which amount shall be reduced by any amounts for working capital reserved by the third-party hotel operator. In addition, until certain renovations are complete, the loan documents impose a “cash trap” which restricts the use of accumulated cash from the Springmaid Beach Resort to the payment of working capital shortfalls, renovation expenditures and distributions required to satisfy the Company’s REIT requirements. The working capital reserve was included in restricted cash on the accompanying consolidated balance sheets.

Recent Financing Transaction

Oakland City Center Mortgage Loan

On August 18, 2017, in connection with the acquisition of Oakland City Center, the Company, through an indirect wholly owned subsidiary (the “Oakland City Center Owner”), entered into a loan agreement with Bank of America, N.A., an unaffiliated lender, for borrowings of up to $103.4 million (the “Oakland City Center Mortgage Loan”). At closing, $94.5 million had been disbursed to the Oakland City Center Owner with the remaining $8.9 million available for future disbursements to be used for tenant improvements and leasing commissions, subject to certain terms and conditions contained in the loan documents.

The Oakland City Center Mortgage Loan matures on September 1, 2022. The Oakland City Center Mortgage Loan bears interest at a floating rate of 175 basis points over one-month LIBOR. Monthly payments are initially interest only. Beginning October 1, 2020, monthly payments will include principal and interest with principal payments of $110,000 or, in the event the Oakland City Center Owner repays any principal of the loan amount, with principal payments calculated using an amortization schedule of 30 years and an annual interest rate of 6.0%, subject to certain terms and conditions contained in the loan documents. The Oakland City Center Owner has the right to prepay the loan in full or in part without fee, premium or penalty subject to certain terms and conditions as described in the loan documents.

KBS SOR US Properties II LLC (“SOR US Properties II”), the Company's indirect wholly owned subsidiary, provided a guaranty of (i) the principal balance and any interest or other sums outstanding under the Oakland City Center Mortgage Loan in the event of certain bankruptcy or insolvency proceedings involving the Oakland City Center Owner, SOR US Properties II or any affiliate thereof, and (ii) the payment of certain liabilities, losses or damages incurred by the lender as a result of certain intentional acts committed by Oakland City Center Owner, the fraud or intentional misrepresentation by Oakland City Center Owner or KBS SOR US Properties II in connection with the loan or the loan documents, the transfer of Oakland City Center Owner’s interest in the property in violation of the loan documents , and in the event of certain bankruptcy or insolvency proceedings involving Oakland City Center Owner, KBS SOR US Properties II or any affiliate thereof.

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DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into the derivatives for speculative purposes.

The Company enters into interest rate caps to mitigate its exposure to rising interest rates on its variable rate notes payable. The values of interest rate caps are primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of interest rate caps. As the remaining life of an interest rate cap decreases, the value of the instrument will generally decrease towards zero.

As of September 30, 2017 and December 31, 2016, the Company had three interest rate caps outstanding, which were not designated as hedging instruments. The following table summarizes the notional amount and other information related to the Company’s derivative instruments as of September 30, 2017 and December 31, 2016. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

						Fair Value of Asset
Derivative Instruments	Effective Date	Maturity Date	Notional Value		Reference Rate	September 30, 2017		December 31, 2016		Balance Sheet Location
Interest Rate Cap	12/29/2014	01/01/2018	$	26,000	One-month LIBOR at 3.00%	$	—	$	—	Prepaid expenses and other assets
Interest Rate Cap	12/15/2015	12/23/2018	$	28,330	One-month LIBOR at 3.00%	—		6		Prepaid expenses and other assets
Interest Rate Cap	12/01/2016	12/01/2019	$	47,110	One-month LIBOR at 3.00%	11		89		Prepaid expenses and other assets
Total Derivative Instruments not designated as hedging instruments						$	11	$	95

During the three and nine months ended September 30, 2017, the Company recorded an unrealized loss of $12,000 and $84,000, respectively, on derivative instruments, which is included in interest expense on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company recorded an unrealized loss of $1,000 and $43,000, respectively, on derivative instruments, which is included in interest expense on the accompanying consolidated statements of operations.

The Company enters into foreign currency forward contracts to mitigate its exposure to foreign currency exchange rate movements on its investment in unconsolidated entity. The foreign currency forward contract is a commitment to deliver a certain amount of currency at a certain price on a specific date in the future.

The following table summarizes the notional amount and other information related to the Company’s foreign currency forward contract as of September 30, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

Derivative Instrument	Notional Amount		Strike Price	Trade Date	Maturity Date
Derivative instrument not designated as hedging instrument
Foreign currency forward contract	$	2,668	1.2704 USD-EUR	09/05/2017	09/07/2021

During the three and nine months ended September 30, 2017, the Company recorded a foreign currency loss of $33,000 on foreign currency forward contract, which is included in general and administrative expenses on the accompanying consolidated statements of operations. The fair value of the foreign currency forward contract was $33,000 liability as of September 30, 2017 included in other liabilities on the accompanying balance sheets.

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FAIR VALUE DISCLOSURES

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:

Cash and cash equivalents, restricted cash, rent and other receivables and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.

Real estate loan receivable: The Company’s real estate loan receivable is presented in the accompanying consolidated balance sheets at its amortized cost net of recorded loan loss reserves (if any) and not at fair value. The fair value of real estate loan receivable was estimated using an internal valuation model that considered the expected cash flows for the loan, underlying collateral value (for collateral-dependent loans) and 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. The Company classifies these inputs as Level 3 inputs.

Derivative instruments:The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments are determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair value of interest rate caps (floors) are determined using the market standard methodology of discounting the future expected cash payments (receipts) which would occur if variable interest rates rise above (below) the strike rate of the caps (floors). The variable interest rates used in the calculation of projected payments (receipts) on the cap (floor) are based on an expectation of future interest rates derived from observed market interest rate curves and volatilities. The fair value of foreign currency forward contract are valued by comparing the contracted forward exchange rate to the current market exchange rate.

Notes payable: The fair value of the Company’s notes payable are estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.

The following were the face value, carrying amount and fair value of the Company’s financial instruments as of September 30, 2017 and December 31, 2016, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial asset:
Real estate loan receivable	$	3,500	$	3,500	$	3,500	$	3,500	$	3,442	$	3,401
Financial liability:
Notes payable	$	309,384	$	305,878	$	309,398	$	212,010	$	208,581	$	211,565

Disclosure of the fair value of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Despite increased capital market and credit market activity, transaction volume for certain financial instruments remains relatively low. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.

As of September 30, 2017, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate caps	$	11	$	—	$	11	$	—
Liability derivative - foreign currency forward contract	$	33	$	—	$	33	$	—

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

The Company has entered into the Advisory Agreement with the Advisor and dealer manager agreements with the Dealer Manager, with respect to the Private Offering and the Public Offering. These agreements entitle the Advisor and the Dealer Manager to specified fees upon the provision of certain offering-related services and the investment of funds in real estate-related investments, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company and certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as described in the Advisory Agreement. The Advisor also serves as the advisor for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”), KBS Strategic Opportunity REIT, Inc. (“KBS Strategic Opportunity REIT”) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”). The Dealer Manager also serves as the dealer manager for the KBS dividend reinvestment plan offerings for KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III and KBS Growth & Income REIT.

On January 6, 2014, the Company, together with KBS REIT I, KBS REIT II, KBS REIT III, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT, the Dealer Manager, the Advisor and other KBS-affiliated entities, 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 the Advisor and its insurance broker among each of the various entities covered by the plan, 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. The Advisor’s and the 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 was added to the insurance program at terms similar to those described above. In June 2017, the Company renewed its participation in the program, and the program is effective through June 30, 2018. As KBS REIT I is implementing its plan of liquidation, at renewal in June 2017, KBS REIT I elected to cease participation in the program and obtain separate insurance coverage.

During the three and nine months ended September 30, 2017 and 2016, no other business transactions occurred between the Company and these other KBS-sponsored programs.

The Advisory Agreement has a one-year term that expires August 12, 2018. The Company may terminate the Advisory Agreement on 60 days’ written notice. The Advisor in its sole discretion may defer any fee payable to it under the Advisory Agreement. All or any portion of such fee not taken may be deferred without interest and paid when the Advisor determines.

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2017 and 2016, respectively, and any related amounts payable as of September 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2017		December 31, 2016
	2017		2016		2017		2016
Expensed
Asset management fees	739		359		1,820		908		21		—
Reimbursable operating expenses (1)	65		75		239		337		39		37
Real estate acquisition fee (2)	—		—		—		1,341		—		—
Capitalized
Acquisition fees (2)	4,126		25		4,151		228		4,126		27
Asset management fees	—		—		67		—		—		—
Additional Paid-in Capital
Sales commissions	267		1,074		2,028		2,808		—		—
Dealer manager fees	133		678		1,180		1,460		—		—
Stockholder servicing fees (3)	505		1,509		1,041		1,509		820		374
Reimbursable other offering costs (4)	87		157		583		177		957		374
	$	5,922	$	3,877	$	11,109	$	8,768	$	5,963	$	812

_____________________

⁽¹⁾ Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cyber-security related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. The Advisor may seek reimbursement for certain employee costs under the Advisory Agreement. These amounts totaled $65,000 and $235,000 for the three and nine months ended September 30, 2017, respectively, and $75,000 and $333,000 for the three and nine months ended September 30, 2016, respectively, and were the only employee costs reimbursed under the Advisory Agreement for the three and nine months ended September 30, 2017 and 2016. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

⁽²⁾ Prior to the adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees related to investment properties were expensed at the time of acquisition. 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.

⁽³⁾ Reflects the estimated amount of the stockholder servicing fee payable based on the terms of the Class T Shares.

⁽⁴⁾ See “Other Offering Costs” below.

Other Offering Costs

Organization and offering costs (other than selling commissions, dealer manager fees and the stockholder servicing fee) of the Company may be paid by the Advisor, the Dealer Manager or their affiliates on behalf of the Company or may be paid directly by the Company. These offering costs include all expenses incurred by the Company in connection with the Private Offering and the Public Offering. Organization costs include all expenses incurred by the Company in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company.

The Company recorded $1.0 million of offering costs (other than selling commissions and dealer manager fees) related to the Private Offering, all of which was initially paid by the Advisor or its affiliates on behalf of the Company and subsequently reimbursed by the Company. In addition, the Company paid $1.9 million in selling commissions and dealer manager fees related to the Private Offering.

During the Public Offering, pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company is obligated to reimburse the Advisor, the Dealer Manager or their affiliates, as applicable, for organization and other offering costs paid by them on behalf of the Company, provided that no reimbursements made by the Company to the Advisor or the Dealer Manager may cause total organization and offering expenses incurred by the Company in connection with the Public Offering (including selling commissions, dealer manager fees and the stockholder servicing fee) to exceed 15% of the aggregate gross proceeds from the Public Offering as of the date of reimbursement. In addition, the Advisor and its affiliates will reimburse the Company 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 the Company in connection with the primary portion of the Public Offering, regardless of when incurred, exceed 1.0% of gross offering proceeds from the primary portion of the Public Offering. The Advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary portion of the Public Offering to the extent they exceed 1.0% of gross proceeds from the primary portion of the Public Offering.

Through September 30, 2017, the Advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions dealer manager fees and stockholder servicing fees) on the Company’s behalf in connection with the Public Offering of approximately $10.2 million. As of September 30, 2017, the Company had recorded $13.0 million in selling commissions and dealer manager fees and $1.5 million of stockholder servicing fees. As of September 30, 2017, the Company had recorded $2.0 million of other organization and offering expenses, which amounts represent the Company’s maximum liability for organization and other offering costs as of September 30, 2017 based on the 1.0% limitation described above.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Management Agreement

Springmaid Beach Resort

The consolidated joint venture entity through which the Company leases the operations for Springmaid Beach Resort has entered into a management agreement with Doubletree Management LLC, an independent third-party hotel operator (the “Operator”) pursuant to which the Operator will manage and operate the Springmaid Beach Resort. The hotel was branded a DoubleTree by Hilton in September 2016 (the “Brand Commencement Date”).

Pursuant to the management agreement the Operator will receive 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 joint venture owner’s priority, which is 12% of the joint venture owner’s total investment);

• an additional services fee in the amount reasonably determined by the Operator from time to time; and

• a brand services fee in the amount of 4% of total rooms revenue, and an other brand services fee in an amount determined by the Operator from time to time.

The management agreement contains specific standards for the operation and maintenance of the hotel, which allows the Operator to maintain uniformity in the system created by the Operator’s franchise. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage and protection of trademarks. Compliance with the management agreement will require the Company to make significant expenditures for capital improvements.     

During the three and nine months ended September 30, 2017, the Company incurred $125,000 and $268,000 of fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company incurred $489,000 and $679,000 of fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations.

Q&C Hotel

A wholly owned subsidiary of the joint venture through which the Company leases the operations of the Q&C Hotel (“Q&C Hotel Operations”) has entered into a management agreement with Encore Hospitality, LLC (“Encore Hospitality”), an affiliate of the joint venture 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. 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). During the three and nine months ended September 30, 2017, the Company incurred $63,000 and $273,000 fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2016, the Company incurred $57,000 and $227,000 fees, respectively, related to the management agreement, and are included in hotel expenses on the accompanying consolidated statements of operations.

Q&C Hotel Operations has also entered into 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. 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 is also responsible for the payment of certain other fees, charges and costs as set forth in the agreement. During the three and nine months ended September 30, 2017, the Company incurred $211,000 and $658,000 of fees, respectively, related to the Marriott franchise agreement. During the three and nine months ended September 30, 2016, the Company incurred $115,000 and $157,000 of fees, respectively, related to the Marriott franchise agreement.

In addition, in connection with the execution of the franchise agreement, SOR US Properties II 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.

Lease Obligations

On December 1, 2016, the 210 West 31st Street Joint Venture acquired a leasehold interest in 210 West 31st Street. The leasehold interest for 210 West 31st Street expires on January 31, 2114. Future minimum lease payments owed by the 210 West 31st Street Joint Venture under the capital lease as of September 30, 2017 is as follows (in thousands):

October 1, 2017 through December 31, 2017	$	90
2018	360
2019	360
2020	360
2021	360
Thereafter	54,036
Total expected minimum lease obligations	55,566
Less: Amount representing interest (1)	(48,816		)
Present value of net minimum lease payments (2)	$	6,750

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⁽¹⁾ Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate at acquisition.

⁽²⁾ The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.

Economic Dependency

The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common stock; the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations as of September 30, 2017. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is a party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and the possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Status of the Offering

The Company commenced the Public Offering on August 12, 2014 and broke escrow on January 7, 2015. As of November 9, 2017, the Company had sold 11,132,941 and 10,587,211 shares of Class A and Class T common stock, respectively, in the Public Offering for aggregate gross offering proceeds of $211.0 million. Included in these amounts were 376,084 and 92,926 shares of Class A and Class T common stock, respectively, sold under the Company's dividend reinvestment plan for aggregate gross offering proceeds of $4.4 million.

Cash Distributions Paid

On October 3, 2017, the Company paid distributions of $0.3 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from September 1, 2017 through September 30, 2017. On November 1, 2017, the Company paid distributions of $0.4 million related to cash distributions on the outstanding shares of the common stock based on daily record dates for the period from October 1, 2017 through October 31, 2017. Distributions for the period from September 1, 2017 through October 31, 2017 were calculated based on stockholders of record each day during the period 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.

Stock Dividends Issued

On August 10, 2017, the Company’s board of directors authorized stock dividends for the month of September 2017, in the amount of 0.001667 shares of each class of the Company’s common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on September 30, 2017.  The Company issued the September 2017 stock dividend, consisting of 44,877 shares, on October 4, 2017.

On August 10, 2017, the Company’s board of directors authorized stock dividends for the month of October 2017, in the amount of 0.001667 shares of each class of the Company’s common stock on each outstanding share of common stock issuable to all common stockholders of record as of the close of business on October 31, 2017.  The Company issued the October 2017 stock dividends, consisting of 45,366 shares, on November 2, 2017.

Distributions Declared

On October 11, 2017, the Company's board of directors declared cash distributions on the outstanding shares of all classes of its common stock based on daily record dates for the period from November 1, 2017 through November 30, 2017, which the Company expects to pay in December 2017. Investors may choose to receive cash distributions or purchase additional shares through the Company's dividend reinvestment plan. Distributions for this period will be calculated based on stockholders of record each day during this period 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.

Also on October 11, 2017, the Company's board of directors authorized a stock dividend for the month of November 2017 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on November 30, 2017. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company expects to issue this stock dividend in December 2017.

On November 13, 2017, the Company's board of directors declared cash distributions on the outstanding shares of all classes of its common stock based on daily record dates for the period from December 1, 2017 through December 31, 2017 and January 1, 2018 through January 31, 2018, which the Company expects to pay in January 2018 and February 2018, respectively. Investors may choose to receive cash distributions or purchase additional shares through the Company's dividend reinvestment plan. Distributions for these periods 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.

Also on November 13, 2017, the Company's board of directors authorized a stock dividend for the months of December 2017 and January 2018 in the amount of 0.001667 shares of common stock on each outstanding share of common stock, issuable to all common stockholders of record as of the close of business on December 31, 2017 and January 31, 2018, respectively. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend. The Company expects to issue these stock dividends in January 2018 and February 2018, respectively.

Acquisition and Related Financing of Real Estate

Grace Court

On October 3, 2017, the Company, through a joint venture (the “Grace Court Joint Venture”) (together, the “Grace Court Purchaser”) between the Company's indirect wholly owned subsidiary and Verus Grace Court, LLC and Verus Partners, LLC (collectively, the “JV Partner”), acquired a portfolio containing three office buildings (“Grace Court II, III and IV”) and one schoolhouse (“Grace Court School”) with an aggregate of 310,886 rentable square feet in Phoenix, Arizona (collectively, “Grace Court”). Neither the JV Partner nor the seller is affiliated with the Company or the Advisor.

The Company owns a 90% equity interest in the Grace Court Joint Venture. The JV Partner is the managing member of the joint venture; however, its authority is limited, as the Company must give approval of major decisions involving the business of the joint venture and Grace Court 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, the Company and the JV Partner may be required to make additional capital contributions to the Grace Court Joint Venture, in proportion to the members’ respective equity interests.

The purchase price of Grace Court was $33.3 million plus closing costs.

Grace Court II, III and IV were developed in 2003, 2008 and 2007, respectively, and Grace Court School was developed in 1911 and remodeled in 2006. At acquisition, Grace Court was 41% leased.

Grace Court Mortgage Loan

On October 3, 2017, in connection with the acquisition of Grace Court, the Grace Court Purchaser entered into a loan agreement with an unaffiliated lender for borrowings of up to $34.1 million (the “Grace Court Mortgage Loan”). As of October 3, 2017, $21.9 million had been disbursed with up to $1.3 million available for future disbursements to be used for capital expenditure project expenses and up to $10.9 million available for future disbursements to be used for tenant improvements and leasing expenses, subject to certain terms and conditions contained in the loan documents.

The Grace Court Mortgage Loan matures on October 9, 2020, with threeone-year extension options, subject to an extension fee and certain terms and conditions contained in the loan documents. The Grace Court Mortgage Loan bears interest at a floating rate of 405 basis points over one-month LIBOR, but at no point shall the interest rate be less than 5.05%. The Grace Court Joint Venture entered into an interest rate cap that effectively limits one-month LIBOR on the full loan amount at 3.00% effective October 3, 2017 through October 15, 2019. Monthly payments are interest only with the outstanding principal balance, all accrued and unpaid interest and all other amounts due on the maturity date. The Grace Court Purchaser has the right to prepay the loan in full or in part, subject to an exit fee and certain terms and conditions as described in the loan documents.

SOR US Properties II is providing a guaranty of the payment of (i) any losses, damages, costs, claims, fines, suits or other expenses of any kind incurred by the lender (including reasonable attorneys' fees and expenses and court costs) as a result of certain actions or omissions committed by us, the Grace Court Purchaser, SOR US Properties II and/or their affiliates in violation of the loan documents and (ii) the principal balance and any interest or sums outstanding under the Grace Court Mortgage Loan in the event of: the breach of certain covenants in the loan documents by the Grace Court Purchaser; certain prohibited transfers of Grace Court; and certain bankruptcy, insolvency or related proceedings involving the Grace Court Purchaser, the Grace Court Joint Venture, SOR US Properties II and /or their affiliates.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries and joint ventures in which the Company has a controlling interest. All significant intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation.  These reclassifications have not changed the results of operations of prior periods. During the year ended December 31, 2016, the Company elected to early adopt ASU No. 2016-18 (as defined below).  As a result, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.  Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the consolidated statements of cash flows.

Segments

The Company has invested in opportunistic real estate investments and originated a loan secured by a non-stabilized real estate asset. In general, the Company intends to hold its investments in opportunistic real estate and other real estate-related assets for capital appreciation. Traditional performance metrics of opportunistic real estate and other real estate-related assets may not be meaningful as these investments are generally non-stabilized and do not provide a consistent stream of interest income or rental revenue. These investments exhibit similar long-term financial performance and have similar economic characteristics. These investments typically involve a higher degree of risk and do not provide a constant stream of ongoing cash flows. As a result, the Company’s management views opportunistic real estate and other real estate-related assets as similar investments. Substantially all of its revenue and net income (loss) is from opportunistic real estate and other real estate-related assets, and therefore, the Company currently aggregates its operating segments into one reportable business segment. In addition, the Company has invested in a participating loan facility secured by a portfolio of light industrial properties located in Europe. However, based on the Company's investment portfolio and future investment focus, the Company does not believe that its investment in the European asset is a reportable segment.

Per Share Data

Basic net income (loss) per share of common stock is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock issued and outstanding for each class of share outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the three and nine months ended September 30, 2017 and 2016. For the purpose of determining the weighted-average number of shares outstanding, stock dividends issued are adjusted retroactively and treated as if they were issued and outstanding for all periods presented. 

Square Footage, Occupancy and Other Measures Policy

Any references to square footage, occupancy or annualized base rent are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.

Recently Issued Accounting Standards Updates

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 was to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU No. 2015-14”), which defers the effective date of ASU No. 2014-09 by one year. Early adoption is permitted but not before the original effective date. The Company is in the process of identifying the Company’s revenue streams that are impacted by the adoption of ASC 606. The Company has preliminarily identified revenues that may be impacted by this standard, which includes hotel revenues (comprised of room, food, beverage, convention services, and miscellaneous revenues), and other ancillary income earned at its properties. The Company’s revenues generated through leasing arrangements are excluded from this standard. The Company continues to evaluate the impact that the standard will have on its consolidated financial statements. The Company expects to adopt the standard using the modified retrospective approach, which requires a cumulative effect adjustment as of the date of the adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”).  The amendments in ASU No. 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.  ASU No. 2016-01 primarily affects accounting for equity investments and financial liabilities where the fair value option has been elected.  ASU No. 2016-01 also requires entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the balance sheet or in the accompanying notes to the financial statements.  ASU No. 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early application of certain provisions of the standard is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU No. 2016-01 to have a significant impact on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). The amendments in ASU No. 2016-02 change the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of ASU No. 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”).  ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.  The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.  ASU No. 2016-13 also amends the impairment model for available-for-sale securities.  An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.   ASU No. 2016-13 also requires new disclosures.  For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.  For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available for sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due.  ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements, but does not expect the adoption of ASU No. 2016-13 to have a material impact on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU No. 2016-15”).  ASU No. 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  The amendments in ASU No. 2016-15 provide guidance on eight specific cash flow issues, including the following that are or may be relevant to the Company: (a) Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities; (b) Cash payments relating to contingent consideration made soon after an acquisition’s consummation date (i.e., approximately three months or less) should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities; (c) Cash payments received from the settlement of insurance claims should be classified on the basis of the nature of the loss (or each component loss, if an entity receives a lump-sum settlement); and (d) Relating to distributions received from equity method investments, ASU No. 2016-15 provides an accounting policy election for classifying distributions received from equity method investments. Such amounts can be classified using a (1) cumulative earnings approach, or (2) nature of distribution approach. Under the cumulative earnings approach, an investor would compare the distributions received to its cumulative equity method earnings since inception.  Any distributions received up to the amount of cumulative equity earnings would be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Alternatively, an investor can choose to classify the distributions based on the nature of activities of the investee that generated the distribution. If the necessary information is subsequently not available for an investee to determine the nature of the activities, the entity should use the cumulative earnings approach for that investee and report a change in accounting principle on a retrospective basis; (e) In the absence of specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the nature of the underlying cash flows. For cash flows with aspects of more than one class that cannot be separated, the classification should be based on the activity that is likely to be the predominant source or use of cash flow.  ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The Company is still evaluating the impact of adopting ASU No. 2016-15 on its financial statements, but does not expect the adoption of ASU No. 2016-15 to have a material impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU No. 2016-18”). ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents.  Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company elected to early adopt ASU No. 2016-18 for the reporting period ending December 31, 2016 and was applied retrospectively. As a result of adoption of ASU No. 2016-18, the Company no longer presents the changes within restricted cash in the consolidated statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”) to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  ASU No. 2017-01 provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.  If the screen is not met, ASU No. 2017-01 (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements.  ASU No. 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs.  Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.  ASU No. 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The amendments can be applied to transactions occurring before the guidance was issued (January 5, 2017) as long as the applicable financial statements have not been issued.  The Company elected to early adopt ASU No. 2017-01 for the reporting period beginning January 1, 2017.  As a result of adoption of ASU No. 2017-01, the Company’s acquisitions of investment properties beginning January 1, 2017 could qualify as asset acquisitions (as opposed to business combinations).  Transaction costs associated with asset acquisitions are capitalized, while transaction costs associated with business combinations will continue to be expensed as incurred.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Schedule of Dividends Declared and Shares Issued

The Company’s board of directors has declared and issued stock dividends on shares of the Company’s common stock during the three and nine months ended September 30, 2017 and 2016 as follows:

Three Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.005001 shares	71,656
2017	0.005001 shares	131,477

Nine Months Ended September 30,	Amount Declared per Share Outstanding (1)	Total Shares Issued
2016	0.015002 shares	168,866
2017	0.015003 shares	357,215

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⁽¹⁾ Amount declared per share outstanding includes one-time stock dividends, quarterly dividends and monthly dividends and assumes each share was issued and outstanding for the entire periods presented. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend.

Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared (“distributed earnings”) and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding other than Class A Common Stock and Class T Common stock during the periods presented.

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Net income (loss) attributable to common stockholders	$	2,893	$	601		$	(834	)	$	(2,302	)
Less: Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Less: Class T Common Stock cash distributions declared	258		249			660			254
Undistributed net income (loss) attributable to common stockholders	$	1,858	$	(912	)	$	(3,681	)	$	(4,478	)
Class A Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	1,128	$	(765	)	$	(2,313	)	$	(4,110	)
Class A Common Stock cash distributions declared	777		1,264			2,187			1,922
Net income (loss) attributable to Class A common stockholders	$	1,905	$	499		$	(126	)	$	(2,188	)
Net income (loss) per common share, basic and diluted	$	0.12	$	0.04		$	(0.01	)	$	(0.18	)
Weighted-average number of common shares outstanding, basic and diluted	16,166,468		13,219,633			15,410,820			12,357,932
Class T Common Stock:
Undistributed net income (loss) attributable to common stockholders	$	730	$	(147	)	$	(1,368	)	$	(368	)
Class T Common Stock cash distributions declared	258		249			660			254
Net income (loss) attributable to Class T common stockholders	$	988	$	102		$	(708	)	$	(114	)
Net income (loss) per common share, basic and diluted	$	0.09	$	0.04		$	(0.08	)	$	(0.10	)
Weighted-average number of common shares outstanding, basic and diluted	10,482,688		2,538,705			9,107,916			1,109,835

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RECENT ACQUISITION OF REAL ESTATE (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, Properties Acquired

During the nine months ended September 30, 2017, the Company acquired the following property (in thousands):

								Intangibles
Property Name	City	State	Acquisition Date	Land		Building and Improvements		Tenant Origination  and Absorption Costs		Above-Market Lease Assets		Below-Market Lease Liabilities			Total Purchase Price
Oakland City Center	Oakland	CA	08/18/2017	$	22,150	$	136,544	$	11,951	$	—	$	(11,872	)	$	158,773

Schedule of Finite-Lived Intangible Assets and Liabilities Acquired, Weighted-Average Amortization Periods

The intangible assets and liabilities acquired in connection with this acquisition have weighted-average amortization periods as of the date of acquisition as follows (in years):

	Tenant Origination and Absorption Costs	Above-Market Lease Assets	Below-Market Lease Liabilities
Oakland City Center	4.8	—	4.7

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REAL ESTATE (Tables)

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Schedule of Real Estate

The following table summarizes the Company’s real estate as of September 30, 2017 and December 31, 2016 (in thousands):

	September 30, 2017			December 31, 2016
Land	$	93,598		$	71,448
Buildings and improvements	340,391			196,050
Construction in progress	62,246			50,452
Tenant origination and absorption costs	16,471			6,226
Total real estate, cost	512,706			324,176
Accumulated depreciation and amortization	(13,998		)	(6,853		)
Total real estate, net	$	498,708		$	317,323

The following table provides summary information regarding the Company’s real estate as of September 30, 2017 (in thousands):

Property	Date Acquired	City	State	Property Type	Land		Building and Improvements(1)		Tenant Origination and Absorption		Total Real Estate, at Cost		Accumulated Depreciation and Amortization			Total Real Estate, Net		Ownership %
Springmaid Beach Resort	12/30/2014	Myrtle Beach	SC	Hotel	$	27,438	$	30,821	$	—	$	58,259	$	(3,617	)	$	54,642	90.0%
Q&C Hotel	12/17/2015	New Orleans	LA	Hotel	1,232		52,921		—		54,153		(3,301		)	50,852		90.0%
2200 Paseo Verde	12/23/2015	Henderson	NV	Office	1,850		11,412		603		13,865		(957		)	12,908		100.0%
Lincoln Court	05/20/2016	Campbell	CA	Office	14,706		33,711		3,917		52,334		(3,221		)	49,113		100.0%
Lofts at NoHo Commons	11/16/2016	North Hollywood	CA	Apartment	26,222		74,902		—		101,124		(1,648		)	99,476		90.0%
210 West 31st Street (2)	12/01/2016	New York	NY	Retail	—		62,246		—		62,246		—			62,246		80.0%
Oakland City Center	08/18/2017	Oakland	CA	Office	22,150		136,624		11,951		170,725		(1,254		)	169,471		100.0%
					$	93,598	$	402,637	$	16,471	$	512,706	$	(13,998	)	$	498,708

_____________________

⁽¹⁾ Building and improvements includes construction in progress.

⁽²⁾ The Company acquired the rights to a leasehold interest with respect to this property. The leasehold interest expires January 31, 2114. As of September 30, 2017, the capital lease had a carrying value of $7.1 million included in construction in progress.

Schedule of Hotel Revenue and Expense

As of September 30, 2017, the Company owned two hotel properties. The following table provides detail information regarding the Company's hotel revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Hotel revenues:
Room	$	4,973	6,499		$	13,304	15,180
Food, beverage and convention services	1,031		883		2,785		2,436
Campground	288		275		838		806
Other (1)	5,868		942		6,546		2,141
Hotel revenues	$	12,160	$	8,599	$	23,473	$	20,563
Hotel expenses:
Room	$	1,391	1,500		$	3,604	3,787
Food, beverage and convention services	868		842		2,381		2,188
General and administrative	601		590		1,748		1,696
Sales and marketing	690		453		2,058		1,236
Repairs and maintenance	454		485		1,350		1,345
Utilities	325		324		777		767
Property taxes and insurance	867		348		1,650		1,050
Other	611		615		1,271		1,397
Hotel expenses	$	5,807	$	5,157	$	14,839	$	13,466

_____________________

⁽¹⁾ Hotel revenues - other includes $5.5 million and $5.8 million of business interruption insurance recovery for the three and nine months ended September 30, 2017, respectively.

Schedule of Office Property Revenue and Expense

The following table provides detailed information regarding the Company's office revenues and expenses for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Office revenues:
Rental income	$	3,983	$	1,817	$	7,406	$	3,165
Tenant reimbursements and other income	235		75		418		124
Office revenues	$	4,218	$	1,892	$	7,824	$	3,289
Office expenses:
Operating, maintenance, and management	$	1,094	$	328	$	1,890	$	552
Real estate taxes and insurance	442		193		823		308
Office expenses	$	1,536	$	521	$	2,713	$	860

Schedule of Future Minimum Rental Income for Company's Properties

As of September 30, 2017, the future minimum rental income from the Company’s office properties under its non-cancelable operating leases was as follows (in thousands):

October 1, 2017 through December 31, 2017	$	4,607
2018	17,512
2019	15,577
2020	12,193
2021	9,383
Thereafter	19,912
	$	79,184

Schedule of Apartment Property Revenue and Expense

The following table provides detailed information regarding the Company's apartment revenues and expenses for the three and nine months ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Apartment revenues:
Rental income	$	1,638	$	4,856
Tenant reimbursements and other income	108		328
Apartment revenues	$	1,746	$	5,184
Apartment expenses:
Operating, maintenance, and management	$	683	$	1,704
Real estate taxes and insurance	343		1,020
Apartment expenses	$	1,026	$	2,724

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2017

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]

Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities

As of September 30, 2017 and December 31, 2016, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Cost	$	16,471		$	6,226		$	27		$	27		$	(13,081	)	$	(1,445	)
Accumulated Amortization	(2,424		)	(1,553		)	(11		)	(6		)	1,239			496
Net Amount	$	14,047		$	4,673		$	16		$	21		$	(11,842	)	$	(949	)

Amortization of Tenant Origination and Absorption Costs, Above-Market Leases and Below-Market Lease Liabilities

Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Three Months Ended September 30,						For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(865	)	$	(627	)	$	(2	)	$	(3	)	$	647	$	200

	Tenant Origination and Absorption Costs						Above-Market Lease Assets						Below-Market Lease Liabilities
	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016			2017		2016
Amortization	$	(2,578	)	$	(1,055	)	$	(5	)	$	(15	)	$	979	$	300

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REAL ESTATE LOAN RECEIVABLE (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of Real Estate Loan Receivable

As of September 30, 2017 and December 31, 2016, the Company had originated one real estate loan receivable as follows (in thousands):

Loan Name Location of Related Property or Collateral

Date Originated

Property Type

Loan Type

Outstanding Principal Balance as of September 30, 2017

Book Value as of September 30, 2017 (1)

Book Value as of December 31, 2016 (1)

Contractual Interest Rate (2)

Annualized Effective Interest Rate (2)

Maturity Date

655 Summer Street First Mortgage

Boston, Massachusetts

09/04/2014

Office

Mortgage

$

3,500

$

3,500

$

3,442

9.25%

11.68%

10/01/2017 (3)

_____________________

⁽¹⁾ Book value of the real estate loan receivable represents outstanding principal balance adjusted for unamortized origination fees and direct origination and acquisition costs.

⁽²⁾ 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 2017, using the interest method annualized (if applicable) and 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, 2017.

⁽³⁾ Subsequent to September 30, 2017, the maturity date of the 655 Summer Street First Mortgage was extended to January 1, 2018.

Schedule of Activity Related to Real Estate Loan Receivable

The following summarizes the activity related to the real estate loan receivable for the nine months ended September 30, 2017 (in thousands):

Real estate loan receivable - December 31, 2016	$	3,442
Amortization of closing costs and origination fees on real estate loan receivable	58
Real estate loan receivable - September 30, 2017	$	3,500

Schedule of Interest and Other Income

For the three and nine months ended September 30, 2017 and 2016, interest income from the real estate loan receivable consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Contractual interest income	$	83	$	83	$	245	$	246
Amortization of closing costs and origination fees, net	20		18		58		52
Interest income from real estate loan receivable	$	103	$	101	$	303	$	298

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NOTE PAYABLE (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

As of September 30, 2017 and December 31, 2016, the Company’s notes payable consisted of the following (in thousands):

	Book Value as of September 30, 2017			Book Value as of December 31, 2016			Contractual Interest Rate (1)	Effective Interest Rate (1)	Payment Type	Maturity Date
Springmaid Beach Resort Mortgage Loan	$	38,000		$	38,000		One-month LIBOR + 3.00%	4.24%	Interest Only	12/30/2017
Q&C Hotel Mortgage Loan	28,330			28,330			One-month LIBOR + 3.25%	4.49%	Interest Only(2)	12/17/2018
2200 Paseo Verde Mortgage Loan(3)	7,947			7,430			One-month LIBOR + 2.25%	3.49%	Interest Only(3)	07/01/2020
Lincoln Court Mortgage Loan	33,500			33,500			One-month LIBOR + 1.75%	2.99%	Interest Only	06/01/2020
Lofts at NoHo Commons Mortgage Loan	72,100			72,100			One-month LIBOR + 2.66%	3.89%	Interest Only	12/01/2019
210 West 31st Street Mortgage Loan(4)	35,007			32,650			One-month LIBOR + 5.50%	6.74%	Interest Only	12/01/2019
Oakland City Center Mortgage Loan(5)	94,500			—			One-month LIBOR + 1.75%	2.99%	Interest Only(5)	09/01/2022
Total notes payable principal outstanding	309,384			212,010
Deferred financing costs, net	(3,506		)	(3,429		)
Total notes payable, net	$	305,878		$	208,581

_____________________

⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2017. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2017 (consisting of the contractual interest rate, contractual floor rates and the effects of interest rate caps, if applicable), using interest rate indices at September 30, 2017, where applicable.

⁽²⁾ Beginning 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.

⁽³⁾ As of September 30, 2017, $7.9 million had been disbursed to the Company and up to $1.6 million is available for future disbursements to be used for tenant improvement costs, capital improvements costs and leasing commissions, subject to certain terms and conditions contained in the loan documents. Beginning August 1, 2019, monthly payments include principal amortization payments of $10,000 per month.

⁽⁴⁾ As of September 30, 2017, $35.0 million had been disbursed to the Company and up to $12.1 million is 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.

⁽⁵⁾ See “Recent Financing Transaction – Oakland City Center Mortgage Loan.”

Schedule of Maturities of Long-term Debt

The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2017 (in thousands):

October 1, 2017 through December 31, 2017	$	38,000
2018	28,330
2019	107,157
2020	41,727
2021	1,320
Thereafter	92,850
	$	309,384

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DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position

The following table summarizes the notional amount and other information related to the Company’s derivative instruments as of September 30, 2017 and December 31, 2016. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

						Fair Value of Asset
Derivative Instruments	Effective Date	Maturity Date	Notional Value		Reference Rate	September 30, 2017		December 31, 2016		Balance Sheet Location
Interest Rate Cap	12/29/2014	01/01/2018	$	26,000	One-month LIBOR at 3.00%	$	—	$	—	Prepaid expenses and other assets
Interest Rate Cap	12/15/2015	12/23/2018	$	28,330	One-month LIBOR at 3.00%	—		6		Prepaid expenses and other assets
Interest Rate Cap	12/01/2016	12/01/2019	$	47,110	One-month LIBOR at 3.00%	11		89		Prepaid expenses and other assets
Total Derivative Instruments not designated as hedging instruments						$	11	$	95

Schedule of Interest Rate Derivatives

The following table summarizes the notional amount and other information related to the Company’s foreign currency forward contract as of September 30, 2017. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (currency in thousands):

Derivative Instrument	Notional Amount		Strike Price	Trade Date	Maturity Date
Derivative instrument not designated as hedging instrument
Foreign currency forward contract	$	2,668	1.2704 USD-EUR	09/05/2017	09/07/2021

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FAIR VALUE DISCLOSURES (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Face Value, Carrying Amounts and Fair Value

The following were the face value, carrying amount and fair value of the Company’s financial instruments as of September 30, 2017 and December 31, 2016, which carrying amounts do not approximate the fair values (in thousands):

	September 30, 2017						December 31, 2016
	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial asset:
Real estate loan receivable	$	3,500	$	3,500	$	3,500	$	3,500	$	3,442	$	3,401
Financial liability:
Notes payable	$	309,384	$	305,878	$	309,398	$	212,010	$	208,581	$	211,565

Schedule of Fair Value of Assets and Liabilities

As of September 30, 2017, the Company measured the following assets at fair value (in thousands):

			Fair Value Measurements Using
	Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring Basis:
Asset derivatives - interest rate caps	$	11	$	—	$	11	$	—
Liability derivative - foreign currency forward contract	$	33	$	—	$	33	$	—

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RELATED PARTY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Schedule of Related Party Costs

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2017 and 2016, respectively, and any related amounts payable as of September 30, 2017 and December 31, 2016 (in thousands):

	Incurred								Payable as of
	Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2017		December 31, 2016
	2017		2016		2017		2016
Expensed
Asset management fees	739		359		1,820		908		21		—
Reimbursable operating expenses (1)	65		75		239		337		39		37
Real estate acquisition fee (2)	—		—		—		1,341		—		—
Capitalized
Acquisition fees (2)	4,126		25		4,151		228		4,126		27
Asset management fees	—		—		67		—		—		—
Additional Paid-in Capital
Sales commissions	267		1,074		2,028		2,808		—		—
Dealer manager fees	133		678		1,180		1,460		—		—
Stockholder servicing fees (3)	505		1,509		1,041		1,509		820		374
Reimbursable other offering costs (4)	87		157		583		177		957		374
	$	5,922	$	3,877	$	11,109	$	8,768	$	5,963	$	812

_____________________

⁽¹⁾ Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cyber-security related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. The Advisor may seek reimbursement for certain employee costs under the Advisory Agreement. These amounts totaled $65,000 and $235,000 for the three and nine months ended September 30, 2017, respectively, and $75,000 and $333,000 for the three and nine months ended September 30, 2016, respectively, and were the only employee costs reimbursed under the Advisory Agreement for the three and nine months ended September 30, 2017 and 2016. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company's direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company.

⁽²⁾ Prior to the adoption of ASU No. 2017-01 on January 1, 2017, acquisition fees related to investment properties were expensed at the time of acquisition. 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.

⁽³⁾ Reflects the estimated amount of the stockholder servicing fee payable based on the terms of the Class T Shares.

⁽⁴⁾ See “Other Offering Costs” below.

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

Future minimum lease payments owed by the 210 West 31st Street Joint Venture under the capital lease as of September 30, 2017 is as follows (in thousands):

October 1, 2017 through December 31, 2017	$	90
2018	360
2019	360
2020	360
2021	360
Thereafter	54,036
Total expected minimum lease obligations	55,566
Less: Amount representing interest (1)	(48,816		)
Present value of net minimum lease payments (2)	$	6,750

_____________________

⁽¹⁾ Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate at acquisition.

⁽²⁾ The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.

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ORGANIZATION (Details)				4 Months Ended	9 Months Ended		12 Months Ended	13 Months Ended	24 Months Ended	33 Months Ended
	Jul. 14, 2017 USD ($) shares	Jul. 31, 2014 shares	Apr. 02, 2014 USD ($)	Jul. 31, 2014 USD ($)	Sep. 30, 2017 USD ($) property investment subsidiary shares	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($) property shares	Aug. 11, 2014 USD ($) shares	Dec. 31, 2016 USD ($) property shares	Sep. 30, 2017 USD ($) property investment subsidiary shares	Aug. 10, 2017 shares	Nov. 14, 2013 shares	Jul. 03, 2013 $ / shares shares
Organizational Structure [Line Items]
Partnership interest in Operating Partnership					0.10%
Partnership interest in the Operating Partnership and is its sole limited partner					99.90%
Number of wholly owned subsidiaries | subsidiary					3					3
Number of investments in an unconsolidated entity | investment					1					1
Proceeds from issuance of common stock | $					$ 61,559,000	$ 69,735,000
Proceeds from issuance of common stock, dividend reinvestment plan | $									$ 650,000,000	$ 1,200,000
Issuance of common stock | $					$ 62,683,000		$ 97,409,000
Class A
Organizational Structure [Line Items]
Common stock, shares issued (in shares)					16,296,767		14,074,793		14,074,793	16,296,767
Class T
Organizational Structure [Line Items]
Common stock, shares issued (in shares)					10,624,216		6,046,591		6,046,591	10,624,216
Common Stock | Class A
Organizational Structure [Line Items]
Issuance of common stock (in shares)					2,062,259		4,104,345
Shares, dividend reinvestment plan										138,208
Issuance of common stock | $					$ 21,000		$ 41,000
Shares issued for services (in shares)	214,175
Shares issued for services | $	$ 2,000,000
Common Stock | Class T
Organizational Structure [Line Items]
Issuance of common stock (in shares)					4,452,107		5,955,697
Shares, dividend reinvestment plan										5,298
Issuance of common stock | $					$ 45,000		$ 60,000
Follow-on Offering | Common Stock | Maximum
Organizational Structure [Line Items]
Stock offering, shares authorized for issuance											500,000,000.0
Shares registered for sale under dividend reinvestment plan											125,000,000.0
IPO
Organizational Structure [Line Items]
Proceeds from issuance of common stock | $										$ 207,100,000
Proceeds from issuance of common stock, dividend reinvestment plan | $										$ 3,900,000
IPO | Common Stock
Organizational Structure [Line Items]
Shares registered in primary offering												100,000,000
Shares registered for sale under dividend reinvestment plan												80,000,000
IPO | Common Stock | Class A
Organizational Structure [Line Items]
Issuance of common stock (in shares)										10,912,156
Shares, dividend reinvestment plan										342,508
IPO | Common Stock | Class T
Organizational Structure [Line Items]
Issuance of common stock (in shares)										10,407,804
Shares, dividend reinvestment plan										78,227
IPO | Common Stock | Maximum
Organizational Structure [Line Items]
Stock offering, shares authorized for issuance												180,000,000
Private Placement
Organizational Structure [Line Items]
Proceeds from issuance of common stock | $								$ 32,200,000
Private Placement | Common Stock
Organizational Structure [Line Items]
Issuance of common stock (in shares)								3,619,851
Hotel
Organizational Structure [Line Items]
Number of real estate properties | property					2					2
Office Building
Organizational Structure [Line Items]
Number of real estate properties | property					3					3
Apartment Building
Organizational Structure [Line Items]
Number of real estate properties | property					1					1
Retail Property
Organizational Structure [Line Items]
Number of real estate properties | property					1		1		1	1
KBS Capital Advisors LLC
Organizational Structure [Line Items]
Common stock, shares issued (in shares)													21,739
Common stock, purchase price per share | $ / shares													$ 9.20
Willowbrook Capital Group LLC | Private Placement | Common Stock | Class A
Organizational Structure [Line Items]
Issuance of common stock (in shares)		120,106
Issuance of common stock | $			$ 120,106	$ 1,000,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Stock Dividends) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 shares	Sep. 30, 2016 shares	Sep. 30, 2017 shares	Sep. 30, 2016 shares
Accounting Policies [Abstract]
Amount Declared per Share Outstanding	0.005001000	0.005001000	0.015003000	0.015002000
Total Shares Issued	131,477	71,656	357,215	168,866

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details)	1 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended
	Mar. 31, 2016 $ / shares	Sep. 30, 2017 $ / shares	Sep. 30, 2016 $ / shares	Sep. 30, 2016 $ / shares	Sep. 30, 2017 segment $ / shares	Sep. 30, 2016 $ / shares	Sep. 27, 2016 $ / shares
Summary of Significant Accounting Policies [Line Items]
Number of reportable segments | segment					1
Special dividends, per share, declared (in dollars per share)							$ 0.05
Dividend Paid
Summary of Significant Accounting Policies [Line Items]
Distribution rate per share per day, declared (in dollars per share)	$ 0.00026202			$ 0.00052404	$ 0.00052548
Class A
Summary of Significant Accounting Policies [Line Items]
Distributions declared per common share (in dollars per share)		$ 0.048	$ 0.098		0.143	$ 0.154
Class T
Summary of Significant Accounting Policies [Line Items]
Distributions declared per common share (in dollars per share)		$ 0.025	$ 0.074		$ 0.073	$ 0.098

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (EPS Two-class Method) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income (loss) attributable to common stockholders	$ 2,893	$ 601	$ (834)	$ (2,302)
Undistributed net income (loss) attributable to common stockholders	1,858	(912)	(3,681)	(4,478)
Class A
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income (loss) attributable to common stockholders	1,905	499	(126)	(2,188)
Less: Common Stock cash distributions declared	777	1,264	2,187	1,922
Undistributed net income (loss) attributable to common stockholders	$ 1,128	$ (765)	$ (2,313)	$ (4,110)
Net income (loss) per common share, basic and diluted (in dollars per share)	$ 0.12	$ 0.04	$ (0.01)	$ (0.18)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	16,166,468	13,219,633	15,410,820	12,357,932
Class T
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income (loss) attributable to common stockholders	$ 988	$ 102	$ (708)	$ (114)
Less: Common Stock cash distributions declared	258	249	660	254
Undistributed net income (loss) attributable to common stockholders	$ 730	$ (147)	$ (1,368)	$ (368)
Net income (loss) per common share, basic and diluted (in dollars per share)	$ 0.09	$ 0.04	$ (0.08)	$ (0.10)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	10,482,688	2,538,705	9,107,916	1,109,835

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RECENT ACQUISITION OF REAL ESTATE (Schedule of Business Acquisitions, Properties Acquired) (Details) - Oakland City Center $ in Thousands	Sep. 30, 2017 USD ($)
Business Acquisition [Line Items]
Land	$ 22,150
Building and Improvements	136,544
Tenant Origination and Absorption Costs	11,951
Above-Market Lease Assets	0
Below-Market Lease Liabilities	(11,872)
Total Purchase Price	$ 158,773

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RECENT ACQUISITION OF REAL ESTATE (Schedule of Finite-Lived Intangible Assets and Liabilities Acquired, Weighted-Average Amortization Periods) (Details) - Oakland City Center	9 Months Ended
	Sep. 30, 2017
Tenant origination and absorption costs
Business Acquisition [Line Items]
Weighted-average amortization periods	4 years 9 months 18 days
Below-Market Lease Liabilities
Business Acquisition [Line Items]
Weighted-average amortization periods	4 years 8 months 12 days

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RECENT ACQUISITION OF REAL ESTATE (Narrative) (Details) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Business Combinations [Abstract]
Total revenues recognized from business combination	$ 2.4
Operating expense recognized from business combination	1.2
Oakland City Center
Business Acquisition [Line Items]
Amortization of acquisition costs	$ 5.5

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REAL ESTATE (Narrative) (Details) - property	Sep. 30, 2017	Dec. 31, 2016
Hotel
Real Estate Properties [Line Items]
Number of real estate properties	2
Office Building
Real Estate Properties [Line Items]
Number of real estate properties	3
Apartment Building
Real Estate Properties [Line Items]
Number of real estate properties	1
Retail Property
Real Estate Properties [Line Items]
Number of real estate properties	1	1

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REAL ESTATE (Schedule of Real Estate Investments) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Real Estate Properties [Line Items]
Total real estate, cost	$ 512,706	$ 324,176
Accumulated depreciation and amortization	(13,998)	(6,853)
Total real estate, net	$ 498,708	317,323
Springmaid Beach Resort
Real Estate Properties [Line Items]
Date Originated	Dec. 30, 2014
Total real estate, cost	$ 58,259
Accumulated depreciation and amortization	(3,617)
Total real estate, net	$ 54,642
Ownership %	90.00%
Q&C Hotel
Real Estate Properties [Line Items]
Date Originated	Dec. 17, 2015
Total real estate, cost	$ 54,153
Accumulated depreciation and amortization	(3,301)
Total real estate, net	$ 50,852
Ownership %	90.00%
2200 Paseo Verde
Real Estate Properties [Line Items]
Date Originated	Dec. 23, 2015
Total real estate, cost	$ 13,865
Accumulated depreciation and amortization	(957)
Total real estate, net	$ 12,908
Ownership %	100.00%
Lincoln Court
Real Estate Properties [Line Items]
Date Originated	May 20, 2016
Total real estate, cost	$ 52,334
Accumulated depreciation and amortization	(3,221)
Total real estate, net	$ 49,113
Ownership %	100.00%
Lofts at NoHo Commons
Real Estate Properties [Line Items]
Date Originated	Nov. 16, 2016
Total real estate, cost	$ 101,124
Accumulated depreciation and amortization	(1,648)
Total real estate, net	$ 99,476
Ownership %	90.00%
210 West 31st Street
Real Estate Properties [Line Items]
Date Originated	Dec. 01, 2016
Total real estate, cost	$ 62,246
Accumulated depreciation and amortization	0
Total real estate, net	$ 62,246
Ownership %	80.00%
Capital lease obligations	$ 7,100
Oakland City Center
Real Estate Properties [Line Items]
Date Originated	Aug. 18, 2017
Total real estate, cost	$ 170,725
Accumulated depreciation and amortization	(1,254)
Total real estate, net	$ 169,471
Ownership %	100.00%
Land
Real Estate Properties [Line Items]
Total real estate, cost	$ 93,598	71,448
Land | Springmaid Beach Resort
Real Estate Properties [Line Items]
Total real estate, cost	27,438
Land | Q&C Hotel
Real Estate Properties [Line Items]
Total real estate, cost	1,232
Land | 2200 Paseo Verde
Real Estate Properties [Line Items]
Total real estate, cost	1,850
Land | Lincoln Court
Real Estate Properties [Line Items]
Total real estate, cost	14,706
Land | Lofts at NoHo Commons
Real Estate Properties [Line Items]
Total real estate, cost	26,222
Land | 210 West 31st Street
Real Estate Properties [Line Items]
Total real estate, cost	0
Land | Oakland City Center
Real Estate Properties [Line Items]
Total real estate, cost	22,150
Buildings and improvements
Real Estate Properties [Line Items]
Total real estate, cost	340,391	196,050
Construction in progress
Real Estate Properties [Line Items]
Total real estate, cost	62,246	50,452
Buildings and Improvements
Real Estate Properties [Line Items]
Total real estate, cost	402,637
Buildings and Improvements | Springmaid Beach Resort
Real Estate Properties [Line Items]
Total real estate, cost	30,821
Buildings and Improvements | Q&C Hotel
Real Estate Properties [Line Items]
Total real estate, cost	52,921
Buildings and Improvements | 2200 Paseo Verde
Real Estate Properties [Line Items]
Total real estate, cost	11,412
Buildings and Improvements | Lincoln Court
Real Estate Properties [Line Items]
Total real estate, cost	33,711
Buildings and Improvements | Lofts at NoHo Commons
Real Estate Properties [Line Items]
Total real estate, cost	74,902
Buildings and Improvements | 210 West 31st Street
Real Estate Properties [Line Items]
Total real estate, cost	62,246
Buildings and Improvements | Oakland City Center
Real Estate Properties [Line Items]
Total real estate, cost	136,624
Tenant origination and absorption costs
Real Estate Properties [Line Items]
Total real estate, cost	16,471	$ 6,226
Tenant origination and absorption costs | Springmaid Beach Resort
Real Estate Properties [Line Items]
Total real estate, cost	0
Tenant origination and absorption costs | Q&C Hotel
Real Estate Properties [Line Items]
Total real estate, cost	0
Tenant origination and absorption costs | 2200 Paseo Verde
Real Estate Properties [Line Items]
Total real estate, cost	603
Tenant origination and absorption costs | Lincoln Court
Real Estate Properties [Line Items]
Total real estate, cost	3,917
Tenant origination and absorption costs | Lofts at NoHo Commons
Real Estate Properties [Line Items]
Total real estate, cost	0
Tenant origination and absorption costs | 210 West 31st Street
Real Estate Properties [Line Items]
Total real estate, cost	0
Tenant origination and absorption costs | Oakland City Center
Real Estate Properties [Line Items]
Total real estate, cost	$ 11,951

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REAL ESTATE (Hotel Revenue and Expenses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Hotel revenues:
Hotel revenues	$ 12,160	$ 8,599	$ 23,473	$ 20,563
Hotel expenses:
General and administrative	1,146	646	2,492	2,073
Hotel expenses	5,807	5,157	14,839	13,466
Insurance recoveries	5,500		5,800
Hotel
Hotel revenues:
Room	4,973	6,499	13,304	15,180
Food, beverage and convention services	1,031	883	2,785	2,436
Campground	288	275	838	806
Other	5,868	942	6,546	2,141
Hotel revenues	12,160	8,599	23,473	20,563
Hotel expenses:
Room	1,391	1,500	3,604	3,787
Food, beverage and convention services	868	842	2,381	2,188
General and administrative	601	590	1,748	1,696
Sales and marketing	690	453	2,058	1,236
Repairs and maintenance	454	485	1,350	1,345
Utilities	325	324	777	767
Property taxes and insurance	867	348	1,650	1,050
Other	611	615	1,271	1,397
Hotel expenses	$ 5,807	$ 5,157	$ 14,839	$ 13,466

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REAL ESTATE (Springmaid Beach Resort) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Real Estate [Line Items]
Increase (Decrease) in Recoverable Property Damage Costs		$ 1,614	$ 0
Insurance recoveries	$ 5,500	5,800
Springmaid Beach Resort
Real Estate [Line Items]
Loss due to property damages				$ 3,700
Insurance proceeds received for property damages				3,700
Property damages		8,200		2,500
Springmaid Beach Resort | Hotel Revenues
Real Estate [Line Items]
Insurance recoveries	$ 5,500	$ 5,800
Springmaid Beach Resort | Prepaid Expenses and Other Assets
Real Estate [Line Items]
Estimated insurance recoveries				$ 6,200
Springmaid Beach Resort | Maximum
Real Estate [Line Items]
Coverage for property damage and business interruption as percent of replacement cost per incident	3.00%	3.00%

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REAL ESTATE (Office Property) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) ft² property	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) ft² property	Sep. 30, 2016 USD ($)
Real Estate Properties [Line Items]
Total revenues	$ 18,227	$ 10,592	$ 36,784	$ 24,150
Total expenses	$ 16,218	9,928	$ 39,562	26,449
Office Building
Real Estate Properties [Line Items]
Number of real estate properties | property	3		3
Square feet in conference center | ft²	551,380		551,380
Percentage of portfolio occupied	90.00%		90.00%
Rental income	$ 3,983	1,817	$ 7,406	3,165
Tenant reimbursements and other income	235	75	418	124
Total revenues	4,218	1,892	7,824	3,289
Operating, maintenance, and management	1,094	328	1,890	552
Real estate taxes and insurance	442	193	823	308
Total expenses	$ 1,536	$ 521	$ 2,713	$ 860

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REAL ESTATE (Operating Leases) (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Other Liabilities
Real Estate Properties [Line Items]
Security deposit liability	$ 1.0	$ 0.7
Maximum
Real Estate Properties [Line Items]
Operating lease, term	10 years 10 months 18 days
Weighted Average
Real Estate Properties [Line Items]
Operating lease, term	3 years 6 months

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REAL ESTATE (Future Minimum Rental Income) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Real Estate [Abstract]
October 1, 2017 through December 31, 2017	$ 4,607
2018	17,512
2019	15,577
2020	12,193
2021	9,383
Thereafter	19,912
Future minimum rental income	$ 79,184

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REAL ESTATE (Apartment Property) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) property unit	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) property unit	Sep. 30, 2016 USD ($)
Real Estate Properties [Line Items]
Total revenues	$ 18,227	$ 10,592	$ 36,784	$ 24,150
Total expenses	$ 16,218	$ 9,928	$ 39,562	$ 26,449
Apartment Building
Real Estate Properties [Line Items]
Number of real estate properties | property	1		1
Number of units in real estate property | unit	292		292
Percentage of real estate portfolio occupied	94.00%		94.00%
Rental income	$ 1,638		$ 4,856
Tenant reimbursements and other income	108		328
Total revenues	1,746		5,184
Operating, maintenance, and management	683		1,704
Real estate taxes and insurance	343		1,020
Total expenses	$ 1,026		$ 2,724

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract]
Tenant Origination And Absorption Costs, Cost	$ 16,471		$ 16,471		$ 6,226
Tenant Origination and Absorption Costs, Accumulated Amortization	(2,424)		(2,424)		(1,553)
Tenant Origination and Absorption Costs, Net Amount	14,047		14,047		4,673
Tenant Origination and Absorption Costs, Amortization expense	(865)	$ (627)	(2,578)	$ (1,055)
Above-Market Lease Assets, Cost	27		27		27
Above-Market Lease Assets, Accumulated Amortization	(11)		(11)		(6)
Above-Market Lease Assets, Net Amount	16		16		21
Above-Market Lease Assets, Amortization expense	(2)	(3)	(5)	(15)
Below-Market Lease Liabilities, Cost	(13,081)		(13,081)		(1,445)
Below-Market Lease Liabilities, Accumulated Amortization	1,239		1,239		496
Below-Market Lease Liabilities, Net Amount	(11,842)		(11,842)		$ (949)
Below-Market Lease Liabilities, Amortization expense	$ 647	$ 200	$ 979	$ 300

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TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Line Items]
Remaining amortization period			31 years 9 months 18 days
Depreciation and amortization	$ 3,709	$ 2,314	$ 9,176	$ 5,299
Housing Subsidy Intangible Asset
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Line Items]
Depreciation and amortization	20		60
Prepaid Expenses and Other Assets
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Line Items]
Intangible assets	$ 2,500		$ 2,500

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REAL ESTATE LOAN RECEIVABLE (Schedule of Real Estate Loans Receivable) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) property	Dec. 31, 2016 USD ($) property
Accounts, Notes, Loans and Financing Receivable [Line Items]
Book Value	$ 3,500	$ 3,442
Retail Property
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of real estate properties | property	1	1
Office Building
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of real estate properties | property	3
Office Building | 655 Summer Street First Mortgage | Mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Date Originated	Sep. 04, 2014
Outstanding Principal Balance	$ 3,500
Book Value	$ 3,500	$ 3,442
Interest rate during period	9.25%
Annualized Effective Interest Rate	11.68%

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REAL ESTATE LOAN RECEIVABLE (Schedule of Activity Related to Real Estate Loans Receivable) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Real Estate Loans Receivable [Roll Forward]
Real estate loan receivable - December 31, 2016			$ 3,442
Amortization of closing costs and origination fees on real estate loan receivable	$ 20	$ 18	58	$ 52
Real estate loan receivable - September 30, 2017	$ 3,500		$ 3,500

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REAL ESTATE LOAN RECEIVABLE (Schedule of Interest Income from Real Estate Loans Receivable) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Receivables [Abstract]
Contractual interest income	$ 83	$ 83	$ 245	$ 246
Amortization of origination fees and costs and acquisition costs, net	20	18	58	52
Interest income from real estate loan receivable	$ 103	$ 101	$ 303	$ 298

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INVESTMENT IN UNCONSOLIDATED ENTITY (Details) $ in Thousands, € in Millions		3 Months Ended		9 Months Ended
	Jun. 28, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Jun. 28, 2016 EUR (€)
Schedule of Equity Method Investments [Line Items]
Equity in income of unconsolidated entity		$ 14	$ 58	$ 40	$ 58
Real Estate Joint Venture | Industrial
Schedule of Equity Method Investments [Line Items]
Current capacity	$ 2,900					€ 2.6
Amount outstanding	$ 2,300					€ 2.1
Ownership interest	5.00%					5.00%
Investments in unconsolidated joint ventures	$ 105,600					€ 95.5
Amortization of acquisition costs	$ 200
Equity in income of unconsolidated entity		$ 14	$ 58	$ 40	$ 100

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NOTE PAYABLE (Schedule of Notes Payable) (Details) - USD ($) $ in Thousands		9 Months Ended
	Aug. 18, 2017	Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 309,384	$ 212,010
Deferred financing costs, net		(3,506)	(3,429)
Total notes payable, net		305,878	208,581
Mortgage | Springmaid Beach Resort Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 38,000	38,000
Effective Interest Rate		4.24%
Mortgage | Springmaid Beach Resort Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		3.00%
Mortgage | Q&C Hotel Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 28,330	28,330
Effective Interest Rate		4.49%
Mortgage | Q&C Hotel Mortgage Loan | Beginning February 1, 2018
Debt Instrument [Line Items]
Periodic payment		$ 55
Mortgage | Q&C Hotel Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		3.25%
Mortgage | 2200 Paseo Verde Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 7,947	7,430
Effective Interest Rate		3.49%
Mortgage | 2200 Paseo Verde Mortgage Loan | Secured Debt
Debt Instrument [Line Items]
Amount outstanding		$ 7,900
Unused borrowing capacity, amount		1,600
Mortgage | 2200 Paseo Verde Mortgage Loan | Beginning August 1, 2019 | Secured Debt
Debt Instrument [Line Items]
Periodic payment		$ 10
Mortgage | 2200 Paseo Verde Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		2.25%
Mortgage | Lincoln Court Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 33,500	33,500
Effective Interest Rate		2.99%
Mortgage | Lincoln Court Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		1.75%
Mortgage | Lofts at NoHo Commons Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 72,100	72,100
Effective Interest Rate		3.89%
Mortgage | Lofts at NoHo Commons Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		2.66%
Mortgage | 210 West 31st Street Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 35,007	32,650
Effective Interest Rate		6.74%
Mortgage | 210 West 31st Street Mortgage Loan | Secured Debt
Debt Instrument [Line Items]
Amount outstanding		$ 35,000
Unused borrowing capacity, amount		$ 12,100
Mortgage | 210 West 31st Street Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate		5.50%
Mortgage | Oakland City Center Mortgage Loan
Debt Instrument [Line Items]
Total notes payable principal outstanding		$ 94,500	$ 0
Effective Interest Rate		2.99%
Periodic payment	$ 110
Amount outstanding	94,500
Unused borrowing capacity, amount	$ 8,900
Mortgage | Oakland City Center Mortgage Loan | One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate	1.75%	1.75%

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NOTE PAYABLE (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Interest expense	$ 2,255	$ 931	$ 5,798	$ 2,379
Amortization of deferred financing costs	400	100	1,100	400
Unrealized loss on derivative instruments	12	1	84	43
Interest capitalized	1,300	$ 54	2,985	$ 126
Deferred finance costs	3,600		3,600		$ 3,400
Interest payable	1,000		1,000		$ 700
Notes Payable
Debt Instrument [Line Items]
Deferred finance costs	3,500		3,500
Prepaid Expenses and Other Assets
Debt Instrument [Line Items]
Deferred finance costs	$ 100		$ 100

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NOTE PAYABLE (Schedule of Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
October 1, 2017 through December 31, 2017	$ 38,000
2018	28,330
2019	107,157
2020	41,727
2021	1,320
Thereafter	92,850
Total	$ 309,384	$ 212,010

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NOTE PAYABLE (Recent Financing Transaction) (Details) - Oakland City Center Mortgage Loan - Mortgage - USD ($)		9 Months Ended
	Aug. 18, 2017	Sep. 30, 2017
Debt Instrument [Line Items]
Current capacity	$ 103,400,000.0
Amount outstanding	94,500,000
Unused borrowing capacity, amount	8,900,000
Periodic payment	$ 110,000
Amortization schedule of mortgage loans on real estate	30 years
Interest rate during period	6.00%
One-month LIBOR
Debt Instrument [Line Items]
Contractual Interest Rate	1.75%	1.75%

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DERIVATIVE INSTRUMENTS (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) instrument	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) instrument	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($) instrument
Derivative [Line Items]
Fair Value of Asset	$ 11,000		$ 11,000		$ 95,000
Unrealized loss on derivative instruments	$ 12,000	$ 1,000	$ 84,000	$ 43,000
Interest Rate Cap
Derivative [Line Items]
Number of Instruments Held | instrument	3		3		3
Interest Rate Cap | One-month LIBOR
Derivative [Line Items]
Reference Rate	3.00%		3.00%
Interest Rate Cap | Prepaid Expenses and Other Assets
Derivative [Line Items]
Notional Value	$ 26,000,000		$ 26,000,000
Fair Value of Asset	$ 0		$ 0		$ 0
Interest Rate Cap 1 | One-month LIBOR
Derivative [Line Items]
Reference Rate	3.00%		3.00%
Interest Rate Cap 1 | Prepaid Expenses and Other Assets
Derivative [Line Items]
Notional Value	$ 28,330,000		$ 28,330,000
Fair Value of Asset	$ 0		$ 0		6,000
Interest Rate Cap 2 | One-month LIBOR
Derivative [Line Items]
Reference Rate	3.00%		3.00%
Interest Rate Cap 2 | Prepaid Expenses and Other Assets
Derivative [Line Items]
Notional Value	$ 47,110,000		$ 47,110,000
Fair Value of Asset	11,000		11,000		$ 89,000
Foreign currency forward contract | General and Administrative Expense
Derivative [Line Items]
Foreign currency loss	(33,000)
Foreign currency forward contract | Not Designated as Hedging Instrument
Derivative [Line Items]
Notional Value	$ 2,668,000		$ 2,668,000
Strike Price	1.2704		1.2704
Foreign currency forward contract | Other Liabilities
Derivative [Line Items]
Derivative fair value	$ 33,000		$ 33,000

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FAIR VALUE DISCLOSURES (Schedule of Face Value, Carrying Amounts and Fair Value) (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate loans receivable, Face Value	$ 3,500,000	$ 3,500,000
Notes payable, Face Value	309,384,000	212,010,000
Carrying Amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate loans receivable, Value	3,500,000	3,442,000
Notes payable, Value	305,878,000	208,581,000
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate loans receivable, Value	3,500,000	3,401,000
Notes payable, Value	$ 309,398,000	$ 211,565,000

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FAIR VALUE DISCLOSURES (Schedule of Assets and Liabilities at Fair Value) (Details) - Recurring Basis: $ in Thousands	Sep. 30, 2017 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives - interest rate caps	$ 11
Liability derivative - foreign currency forward contract	33
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives - interest rate caps	0
Liability derivative - foreign currency forward contract	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives - interest rate caps	11
Liability derivative - foreign currency forward contract	33
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset derivatives - interest rate caps	0
Liability derivative - foreign currency forward contract	$ 0

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RELATED PARTY TRANSACTIONS (Narrative) (Details) $ in Millions	9 Months Ended	51 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)
Related Party Transaction [Line Items]
Term of advisory agreement	1 year
Period of termination notice	60 days
Private Placement
Related Party Transaction [Line Items]
Offering costs (other than selling commissions and dealer manager fees)	$ 1.0	$ 1.0
Selling commissions and dealer manager fees	1.9
IPO
Related Party Transaction [Line Items]
Selling commissions and dealer manager fees	13.0
Organization and offering costs incurred by related party		10.2
Due to officers or stockholders	1.5	1.5
Other organization and offering costs	$ 2.0	$ 2.0
IPO | KBS Capital Advisors LLC | Minimum
Related Party Transaction [Line Items]
Percent of aggregate gross proceeds	15.00%	15.00%
Reimbursable offering costs determination, gross offering costs, percentage	1.00%	1.00%

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RELATED PARTY TRANSACTIONS (Related-party Costs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Payable as of	$ 5,963		$ 5,963		$ 812
Payment for administrative fees	65	$ 75	235	$ 333
Advisor and Dealer Manager
Related Party Transaction [Line Items]
Incurred	5,922	3,877	11,109	8,768
Payable as of	5,963		5,963		812
Advisor and Dealer Manager | Asset management fees
Related Party Transaction [Line Items]
Expenses	739	359	1,820	908
Payable as of	21		21		0
Advisor and Dealer Manager | Reimbursable operating expenses
Related Party Transaction [Line Items]
Expenses	65	75	239	337
Payable as of	39		39		37
Advisor and Dealer Manager | Real estate acquisition fee
Related Party Transaction [Line Items]
Expenses	0	0	0	1,341
Payable as of	0		0		0
Advisor and Dealer Manager | Acquisition fees
Related Party Transaction [Line Items]
Expenses	4,126	25	4,151	228
Payable as of	4,126		4,126		27
Advisor and Dealer Manager | Asset management fees
Related Party Transaction [Line Items]
Expenses	0	0	67	0
Payable as of	0		0		0
Advisor and Dealer Manager | Sales commissions
Related Party Transaction [Line Items]
Incurred	267	1,074	2,028	2,808
Payable as of	0		0		0
Advisor and Dealer Manager | Dealer manager fees
Related Party Transaction [Line Items]
Incurred	133	678	1,180	1,460
Payable as of	0		0		0
Advisor and Dealer Manager | Stockholder servicing fees
Related Party Transaction [Line Items]
Incurred	505	1,509	1,041	1,509
Payable as of	820		820		374
Advisor and Dealer Manager | Reimbursable other offering costs
Related Party Transaction [Line Items]
Incurred	87	$ 157	583	$ 177
Payable as of	$ 957		$ 957		$ 374

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Lease Obligations
October 1, 2017 through December 31, 2017	$ 90		$ 90
2018	360		360
2019	360		360
2020	360		360
2021	360		360
Thereafter	54,036		54,036
Total	55,566		55,566
Less: Amount representing interest	(48,816)		(48,816)
Present value of net minimum lease payments	6,750		$ 6,750
Springmaid Beach Resort | Doubletree Management LLC
Loss Contingencies [Line Items]
Base fee as percentage of total operating revenue in year one			2.50%
Base fee as percentage of total operating revenue in year two			2.75%
Base fee as percentage of total operating revenue, thereafter			3.00%
Management fee as percent of any campground revenue			2.00%
Incentive fee as percent of operating cash flow			15.00%
Percent of total investments			12.00%
Brand services fee as percent of total room revenue			4.00%
Fees incurred to management agreement	125	$ 489	$ 268	$ 679
Q&C Hotel | Encore Hospitality, LLC
Loss Contingencies [Line Items]
Management agreement, extension period			5 years
Base fee as percentage of gross revenue			4.00%
Q&C Hotel | Encore Hospitality, LLC | Direct Costs of Hotels
Loss Contingencies [Line Items]
Management agreement, fees accrued	63	57	$ 273	227
Q&C Hotel | Marriott International
Loss Contingencies [Line Items]
Brand services fee as percent of total room revenue			2.00%
Fees incurred to management agreement	$ 211	$ 115	$ 658	$ 157
Brand services fee as percent of total room revenue, after three years			5.00%
Monthly marketing fund contribution fees as percent of gross room sales			1.50%

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SUBSEQUENT EVENTS (Offering and Distributions) (Details) $ / shares in Units, $ in Thousands									1 Months Ended	2 Months Ended		3 Months Ended		6 Months Ended	9 Months Ended		12 Months Ended	24 Months Ended	33 Months Ended
	Nov. 13, 2017	Nov. 09, 2017 USD ($) shares	Nov. 02, 2017 shares	Nov. 01, 2017 USD ($)	Oct. 11, 2017 $ / shares	Oct. 04, 2017 shares	Oct. 03, 2017 USD ($)	Aug. 10, 2017	Mar. 31, 2016 $ / shares	Jan. 31, 2018 $ / shares	Oct. 31, 2017 $ / shares	Sep. 30, 2017 shares	Sep. 30, 2016 shares	Sep. 30, 2016 $ / shares	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016 USD ($) shares	Dec. 31, 2016 USD ($)	Sep. 30, 2017 USD ($) shares
Subsequent Event [Line Items]
Proceeds from issuance of common stock | $															$ 61,559	$ 69,735
Proceeds from issuance of common stock, dividend reinvestment plan | $																		$ 650,000	$ 1,200
Dividends, common stock | $															$ 2,847		$ 2,961
Amount declared per share outstanding												0.005001000	0.005001000		0.015003000	0.015002000
Stock dividends issued, shares												131,477	71,656		357,215	168,866
Dividend Paid
Subsequent Event [Line Items]
Distribution rate per share per day, declared (in dollars per share) | $ / shares									$ 0.00026202					$ 0.00052404	$ 0.00052548
Dividends Issued
Subsequent Event [Line Items]
Amount declared per share outstanding								0.001667
Dividend Declared | Forecast
Subsequent Event [Line Items]
Distribution rate per share per day, declared (in dollars per share) | $ / shares										$ 0.00052548
Class A | Common Stock
Subsequent Event [Line Items]
Issuance of common stock (in shares)															2,062,259		4,104,345
Shares, dividend reinvestment plan																			138,208
Class T | Common Stock
Subsequent Event [Line Items]
Issuance of common stock (in shares)															4,452,107		5,955,697
Shares, dividend reinvestment plan																			5,298
Subsequent Event | Dividend Paid
Subsequent Event [Line Items]
Dividends, common stock | $				$ 400			$ 300
Distribution rate per share per day, declared (in dollars per share) | $ / shares											$ 0.00052548
Subsequent Event | Dividends Issued
Subsequent Event [Line Items]
Stock dividends issued, shares			45,366			44,877
Subsequent Event | Dividend Declared
Subsequent Event [Line Items]
Distribution rate per share per day, declared (in dollars per share) | $ / shares					$ 0.00052548
Amount declared per share outstanding	0.001667				0.001667
Subsequent Event | Common Stock
Subsequent Event [Line Items]
Proceeds from issuance of common stock | $		$ 211,000
Proceeds from issuance of common stock, dividend reinvestment plan | $		$ 4,400
Subsequent Event | Class A
Subsequent Event [Line Items]
Issuance of common stock (in shares)		11,132,941
Shares, dividend reinvestment plan		376,084
Subsequent Event | Class T
Subsequent Event [Line Items]
Issuance of common stock (in shares)		10,587,211
Shares, dividend reinvestment plan		92,926

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SUBSEQUENT EVENTS (Acquisitions) (Details) - Subsequent Event $ in Millions	Oct. 03, 2017 USD ($) ft² property
Grace Court Joint Venture
Subsequent Event [Line Items]
Ownership interest	90.00%
Grace Court
Subsequent Event [Line Items]
Consideration transferred | $	$ 33.3
Percent of property leased	41.00%
Grace Court | Office Building
Subsequent Event [Line Items]
Number of real estate properties acquired	3
Grace Court | Schoolhouse
Subsequent Event [Line Items]
Number of real estate properties acquired	1
Net rentable area | ft²	310,886

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SUBSEQUENT EVENTS (Financing) (Details)	Oct. 03, 2017 USD ($) extension	Sep. 30, 2017
One-month LIBOR | Interest Rate Cap
Subsequent Event [Line Items]
Derivative, interest rate		3.00%
Subsequent Event | Interest Rate Cap | Effective from October 3, 2017 through October 15, 2019
Subsequent Event [Line Items]
Derivative, interest rate	3.00%
Subsequent Event | Grace Court Mortgage Loan [Member] | Mortgage
Subsequent Event [Line Items]
Current capacity	$ 34,100,000.0
Amount outstanding	$ 21,900,000
Number of extensions | extension	3
Extension period	1 year
Subsequent Event | Grace Court Mortgage Loan [Member] | Mortgage | Minimum
Subsequent Event [Line Items]
Interest rate during period	5.05%
Subsequent Event | Grace Court Mortgage Loan [Member] | Mortgage | One-month LIBOR
Subsequent Event [Line Items]
Basis spread on variable rate	4.05%
Subsequent Event | Grace Court Mortgage Loan [Member] | Mortgage | Capital expenditures
Subsequent Event [Line Items]
Unused borrowing capacity, amount	$ 1,300,000
Subsequent Event | Grace Court Mortgage Loan [Member] | Mortgage | Tenant improvements
Subsequent Event [Line Items]
Unused borrowing capacity, amount	$ 10,900,000