QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |||||||
None | None |
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ||||||||||||||||||||
☒ | Smaller reporting company | ||||||||||||||||||||||
Emerging growth company |
June 30, 2023 | ||||||||
(unaudited) | ||||||||
Assets | ||||||||
Real estate | $ | |||||||
Cash and cash equivalents | ||||||||
Restricted cash | ||||||||
Rents and other receivables | ||||||||
Other assets | ||||||||
Total assets | ||||||||
Liabilities | ||||||||
Liabilities for estimated costs in excess of estimated receipts during liquidation | ||||||||
Notes payable | ||||||||
Accounts payable and accrued liabilities | ||||||||
Due to affiliates | ||||||||
Other liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 9) | ||||||||
Net assets in liquidation | $ | |||||||
Assets | ||||||||
Real estate: | ||||||||
Land | $ | |||||||
Buildings and improvements | ||||||||
Tenant origination and absorption costs | ||||||||
Total real estate, cost | ||||||||
Less accumulated depreciation and amortization | ( | |||||||
Total real estate, net | ||||||||
Cash and cash equivalents | ||||||||
Restricted cash | ||||||||
Rents and other receivables | ||||||||
Above-market leases, net | ||||||||
Due from affiliates | ||||||||
Prepaid expenses and other assets | ||||||||
Total assets | $ | |||||||
Liabilities and stockholders’ equity | ||||||||
Notes payable, net | $ | |||||||
Accounts payable and accrued liabilities | ||||||||
Due to affiliates | ||||||||
Below-market leases, net | ||||||||
Other liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 9) | ||||||||
Redeemable common stock | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ | ||||||||
Class A common stock, $ | ||||||||
Class T common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Cumulative distributions and net losses | ( | |||||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ |
Net assets in liquidation, beginning of period | $ | |||||||
Changes in net assets in liquidation | ||||||||
Net assets in liquidation, end of period | $ |
For the Three Months Ended March 31, | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2022 | |||||||||||||||
Revenues: | |||||||||||||||||
Rental income | $ | $ | $ | ||||||||||||||
Other operating income | |||||||||||||||||
Total revenues | |||||||||||||||||
Expenses: | |||||||||||||||||
Operating, maintenance, and management | |||||||||||||||||
Property management fees and expenses to affiliate | |||||||||||||||||
Real estate taxes and insurance | |||||||||||||||||
Asset management fees to affiliate | |||||||||||||||||
General and administrative expenses | |||||||||||||||||
Depreciation and amortization | |||||||||||||||||
Interest expense | |||||||||||||||||
Impairment charges on real estate | |||||||||||||||||
Total expenses | |||||||||||||||||
Other income: | |||||||||||||||||
Interest and other income | |||||||||||||||||
Total other income | |||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Net loss per common share, basic and diluted | $ | ( | $ | ( | $ | ( | |||||||||||
Weighted-average number of common shares outstanding basic and diluted |
Common Stock | Additional Paid-in Capital | Cumulative Distributions and Net Losses | Total Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||
Class A | Class T | ||||||||||||||||||||||||||||||||||||||||
Shares | Amounts | Shares | Amounts | ||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | ( | $ | ( |
Common Stock | Additional Paid-in Capital | Cumulative Distributions and Net Losses | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
Class A | Class T | ||||||||||||||||||||||||||||||||||||||||
Shares | Amounts | Shares | Amounts | ||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Cumulative Distributions and Net Losses | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
Class A | Class T | ||||||||||||||||||||||||||||||||||||||||
Shares | Amounts | Shares | Amounts | ||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Transfers from redeemable common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Redemptions of common stock | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | $ |
Three Months Ended March 31, | Six Months Ended June 30, | ||||||||||
2023 | 2022 | ||||||||||
Cash Flows from Operating Activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Impairment charges on real estate | |||||||||||
Deferred rents | ( | ( | |||||||||
Amortization of above and below-market leases, net | ( | ( | |||||||||
Amortization of deferred financing costs | |||||||||||
Unrealized gain on derivative instruments | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Rents and other receivables | ( | ||||||||||
Prepaid expenses and other assets | ( | ( | |||||||||
Accounts payable and accrued liabilities | ( | ( | |||||||||
Due from affiliates | |||||||||||
Due to affiliates | |||||||||||
Other liabilities | ( | ( | |||||||||
Net cash used in operating activities | ( | ( | |||||||||
Cash Flows from Investing Activities: | |||||||||||
Improvements to real estate | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash Flows from Financing Activities: | |||||||||||
Proceeds from notes payable | |||||||||||
Principal payments on notes payable | ( | ( | |||||||||
Payments to redeem common stock | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents and restricted cash, beginning of period | |||||||||||
Cash and cash equivalents and restricted cash, end of period | $ | $ | |||||||||
Supplemental Disclosure of Cash Flow Information | |||||||||||
Interest paid | $ | $ | |||||||||
Supplemental Disclosure of Noncash Investing and Financing Activities: | |||||||||||
Accrued improvements to real estate | $ | $ | |||||||||
As of April 1, 2023 | ||||||||
Rental income | $ | |||||||
Other operating income | ||||||||
Operating, maintenance, and management | ( | |||||||
Real estate taxes and insurance | ( | |||||||
General and administrative expenses | ( | |||||||
Interest expense | ( | |||||||
Liquidating transaction costs | ( | |||||||
Capital expenditures | ( | |||||||
Liabilities for estimated costs in excess of estimated receipts during liquidation | $ | ( |
April 1, 2023 | Cash Payments (Receipts) | Remeasurement of Assets and Liabilities | June 30, 2023 | |||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Estimated net inflows from investments in real estate | $ | $ | ( | $ | $ | |||||||||||||||||||||
( | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Liquidation transaction costs | ( | ( | ||||||||||||||||||||||||
Corporate expenditures | ( | ( | ||||||||||||||||||||||||
Capital expenditures | ( | ( | ||||||||||||||||||||||||
( | ( | |||||||||||||||||||||||||
Total liabilities for estimated costs in excess of estimated receipts during liquidation | $ | ( | $ | ( | $ | $ | ( |
Book Value as of June 30, 2023 | Book Value as of December 31, 2022 | Contractual Interest Rate as of June 30, 2023 (1) | Effective Interest Rate at June 30, 2023 (1) | Payment Type | Maturity Date (2) | |||||||||||||||||||||||||||||||||
Commonwealth Building Mortgage Loan (3) | $ | $ | One-month LIBOR + | Interest Only | 02/01/2023 | |||||||||||||||||||||||||||||||||
Modified Term Loan (4) | One-month Term SOFR + + | Interest Only | 11/09/2023 | |||||||||||||||||||||||||||||||||||
210 W. Chicago Mortgage Loan (5) | One-month Term SOFR + + | Principal & Interest (5) | 06/28/2024 | |||||||||||||||||||||||||||||||||||
Notes payable principal outstanding | $ | $ | ||||||||||||||||||||||||||||||||||||
Deferred financing costs, net (6) | ( | |||||||||||||||||||||||||||||||||||||
Notes payable, net | $ | $ |
Incurred | Incurred | Receivable as of | Payable as of | ||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | June 30, | December 31, | June 30, | December 31, | ||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||
Expensed | |||||||||||||||||||||||||||||||||||||||||||||||
Asset management fees (1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Reimbursement of operating expenses (2) | |||||||||||||||||||||||||||||||||||||||||||||||
Property management fees (3) | |||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ |
Property Name | Effective Date | Annual Fee Percentage | ||||||||||||
Commonwealth Building | 07/01/2016 | |||||||||||||
The Offices at Greenhouse | 11/14/2016 | |||||||||||||
Institute Property | 11/09/2017 |
Payments Due During the Years Ending December 31, | ||||||||||||||||||||||||||
Debt Obligations | Total | Remainder of 2023 | 2024-2025 | 2026-2027 | ||||||||||||||||||||||
Outstanding debt obligations (1) | $ | 55,873 | $ | 52,297 | $ | 3,576 | $ | — | ||||||||||||||||||
Interest payments on outstanding debt obligations (2) (3) | 1,754 | 1,599 | 155 | — |
Ex. | Description | |||||||
2.1 | ||||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
10.1 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
101.INS | Inline XBRL Instance Document | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
KBS GROWTH & INCOME REIT, INC. | |||||||||||
Date: | August 11, 2023 | By: | /S/ CHARLES J. SCHREIBER, JR. | ||||||||
Charles J. Schreiber, Jr. | |||||||||||
Chairman of the Board, Chief Executive Officer, President and Director | |||||||||||
(principal executive officer) | |||||||||||
Date: | August 11, 2023 | By: | /S/ JEFFREY K. WALDVOGEL | ||||||||
Jeffrey K. Waldvogel | |||||||||||
Chief Financial Officer, Treasurer and Secretary | |||||||||||
(principal financial officer) |
Date: | August 11, 2023 | By: | /S/ CHARLES J. SCHREIBER, JR. | ||||||||
Charles J. Schreiber, Jr. | |||||||||||
Chairman of the Board, Chief Executive Officer, President and Director | |||||||||||
(principal executive officer) |
Date: | August 11, 2023 | By: | /S/ JEFFREY K. WALDVOGEL | ||||||||
Jeffrey K. Waldvogel | |||||||||||
Chief Financial Officer, Treasurer and Secretary | |||||||||||
(principal financial officer) |
Date: | August 11, 2023 | By: | /S/ CHARLES J. SCHREIBER, JR. | ||||||||
Charles J. Schreiber, Jr. | |||||||||||
Chairman of the Board, Chief Executive Officer, President and Director | |||||||||||
(principal executive officer) |
Date: | August 11, 2023 | By: | /S/ JEFFREY K. WALDVOGEL | ||||||||
Jeffrey K. Waldvogel | |||||||||||
Chief Financial Officer, Treasurer and Secretary | |||||||||||
(principal financial officer) |
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Assets | |
Real estate | $ 102,894 |
Cash and cash equivalents | 3,800 |
Restricted cash | 2,325 |
Rents and other receivables | 36 |
Other assets | 79 |
Total assets | 109,134 |
Liabilities | |
Liabilities for estimated costs in excess of estimated receipts during liquidation | 911 |
Notes payable | 104,938 |
Accounts payable and accrued liabilities | 1,836 |
Due to affiliates | 5 |
Other liabilities | 46 |
Total liabilities | 107,736 |
Commitments and contingencies (Note 9) | |
Net assets in liquidation | $ 1,398 |
CONSOLIDATED BALANCE SHEET (Parenthetical) |
Dec. 31, 2022
$ / shares
shares
|
---|---|
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 |
Preferred stock, shares outstanding (in shares) | 0 |
Class A Common Stock | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 |
Common stock, shares issued (in shares) | 9,838,569 |
Common stock, shares outstanding (in shares) | 9,838,569 |
Class T Common Stock | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 |
Common stock, shares issued (in shares) | 307,606 |
Common stock, shares outstanding (in shares) | 307,606 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS $ in Thousands |
3 Months Ended |
---|---|
Jun. 30, 2023
USD ($)
| |
Changes in Net Assets in Liquidation [Roll Forward] | |
Net assets in liquidation, beginning of period | $ 1,398 |
Changes in net assets in liquidation | 0 |
Net assets in liquidation, end of period | $ 1,398 |
ORGANIZATION |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION KBS Growth & Income REIT, Inc. (the “Company”) was formed on January 12, 2015 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2015. Substantially all of the Company’s business is conducted through KBS Growth & Income Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on January 14, 2015. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Growth & Income REIT Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on January 14, 2015, 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. Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement between the Company and the Advisor initially entered into on June 11, 2015, and amended at various times thereafter (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of core real estate properties. On January 27, 2015, the Company issued 20,000 shares of its common stock to the Advisor at a purchase price of $10.00 per share. On June 11, 2015, these outstanding shares of common stock were designated Class A shares of common stock. As of June 30, 2023, the Company had invested in four office properties. Subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Metropolitan Life Insurance Company (the “Commonwealth Lender”) and all interest in the Commonwealth Building was transferred to the buyer. See Note 10, “Subsequent Events – Foreclosure of the Commonwealth Building.” The Company commenced capital raising activities in June 2015 through a private placement offering. The private offering was followed by a public offering and a second private offering. In August 2020, the Company’s board of directors approved the termination of capital raising activities with the termination of the Company’s distribution reinvestment plan offering and second private offering. As of June 30, 2023, the Company had 9,838,569 and 307,606 shares of Class A and Class T common stock outstanding, respectively. On December 15, 2022 and affirmed on February 2, 2023, the Company’s board of directors and a special committee composed of all of the Company’s independent directors (the “Special Committee”) each approved the sale of all of the Company’s assets and the Company’s dissolution pursuant to the terms of a plan of complete liquidation and dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to the Company’s stockholders by selling its assets, paying its debts and distributing the net proceeds from liquidation to the Company’s stockholders. On May 9, 2023, the Company’s stockholders approved the Plan of Liquidation. In connection with its consideration of the Plan of Liquidation, the Company’s board of directors determined to cease regular quarterly distributions and terminated the share redemption program. The Company expects any future liquidity to its stockholders will be provided in the form of liquidating distributions. The Company expects to distribute all of the net proceeds from liquidation to its stockholders within 24 months from May 9, 2023. The Company can give no assurance regarding the timing of asset dispositions in connection with the implementation of the Plan of Liquidation, the sale prices it will receive for its assets, and the amount or timing of any liquidating distributions to be received by its stockholders.
|
PLAN OF LIQUIDATION |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
PLAN OF LIQUIDATION | PLAN OF LIQUIDATION The Plan of Liquidation authorizes the Company to undertake an orderly liquidation. In an orderly liquidation, the Company intends to sell or otherwise dispose of its remaining properties, pay or otherwise settle all of its known liabilities, provide for the payment of its unknown or contingent liabilities, distribute any remaining cash to its stockholders, wind up its operations and dissolve. The Company is authorized to provide for the payment of any unascertained or contingent liabilities and may do so by purchasing insurance, by establishing a reserve fund or in other ways. The Plan of Liquidation enables the Company to sell any and all of its assets without further approval of its stockholders and provides that the amounts and timing of liquidating distributions will be determined by the Company’s board of directors or, if a liquidating trust is formed, by the trustees of the liquidating trust, in their discretion. Pursuant to applicable REIT rules, liquidating distributions the Company pays pursuant to the Plan of Liquidation will qualify for the dividends paid deduction, provided that they are paid within 24 months of the May 9, 2023 approval of the plan by the Company’s stockholders. However, if the Company cannot sell its properties and pay its debts within such time period, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, the Company may transfer and assign its remaining assets to a liquidating trust. Upon such transfer and assignment, the Company’s stockholders would receive beneficial interests in the liquidating trust. The liquidating trust would pay or provide for all of the Company’s liabilities and distribute any remaining net proceeds from liquidation to the holders of beneficial interests in the liquidating trust. If the Company is not able to sell its properties and pay its debt within the 24-month period and the remaining assets are not transferred to a liquidating trust, any distributions made during the 24 months may not qualify for the dividends paid deduction and may increase the Company’s tax liability. The Company’s expectations about the implementation of the Plan of Liquidation and the amount of any liquidating distributions that the Company pays to its stockholders and when the Company will pay them are subject to risks and uncertainties and are based on certain estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of any liquidating distributions the Company pays to its stockholders may be more or less than the Company estimates and the liquidating distributions may be paid later than the Company predicts. There are many factors that may affect the amount of liquidating distributions the Company will ultimately pay to its stockholders. If the Company underestimates its existing obligations and liabilities or the amount of taxes, transaction fees and expenses relating to the liquidation and dissolution or if unanticipated or contingent liabilities arise, the amount of liquidating distributions ultimately paid to the Company’s stockholders could be less than estimated. Moreover, the liquidation value will fluctuate over time in response to developments related to individual assets in the Company’s portfolio and the management of those assets, in response to the real estate and finance markets, based on the amount of net proceeds received from the disposition of the remaining assets and due to other factors. Accordingly, it is not possible to precisely predict the timing of any liquidating distributions the Company pays to it stockholders or the aggregate amount of liquidating distributions that the Company will ultimately pay to its stockholders. No assurance can be given that any liquidating distributions the Company pays to its stockholders will equal or exceed the estimate of net assets in liquidation presented on the Condensed Consolidated Statement of Net Assets as of June 30, 2023. The Company expects to comply with the requirements necessary to continue to qualify as a REIT through the completion of the liquidation process, or until such time as any remaining assets are transferred into a liquidating trust. The board of directors shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status; provided, however, that the board of directors may elect to terminate the Company’s status as a REIT if it determines that such termination would be in the best interest of the stockholders.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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”), including Subtopic 205-30, “Liquidation Basis of Accounting,” as indicated, and the rules and regulations of the Securities and Exchange Commission, 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. Pursuant to the Company’s stockholders’ approval of the Plan of Liquidation, the Company adopted the liquidation basis of accounting as of and for the periods subsequent to April 1, 2023 (as the approval of the Plan of Liquidation by the Company’s stockholders became imminent during the month of April 2023 based on the results of the Company’s solicitation of proxies from its stockholders for their approval of the Plan of Liquidation). Accordingly, on April 1, 2023, assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash or other consideration that the Company expects to realize through the disposal of assets as it carries out the Plan of Liquidation. The liquidation values of the Company’s remaining real estate properties are presented on an undiscounted basis and are generally based on offers the Company received for the sale of three of its properties, which the Company is marketing for sale. Liabilities are carried at their contractual amounts due or estimated settlement amounts. The Company accrues costs and income that it expects to incur and earn through the completion of its liquidation, including the estimated amount of cash or other consideration that the Company expects to realize through the disposal of its assets and the estimated costs to dispose of its assets, to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the Condensed Consolidated Statement of Net Assets. Actual costs and income may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. See Note 2, “Plan of Liquidation” and Note 4, “Liabilities for Estimated Costs in Excess of Estimated Receipts During Liquidation” for further discussion. Actual costs incurred but unpaid as of June 30, 2023 are included in accounts payable and accrued liabilities, due to affiliates and other liabilities on the Condensed Consolidated Statement of Net Assets. Net assets in liquidation represents the remaining estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the sale or transfer of the Company’s remaining real estate properties and the estimated cash flows from operations, actual liquidation costs and sale proceeds may differ materially from the amounts estimated. All financial results and disclosures through March 31, 2023, prior to the adoption of the liquidation basis of accounting, are presented on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2022, the statements of operations, the statements of stockholders’ equity (deficit) and the statements of cash flows for the three months ended March 31, 2023 and the comparative three and six months ended June 30, 2022 are presented using the going concern basis of accounting. The Company’s consolidated financial statements included its accounts and the accounts of REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions were eliminated in consolidation. Use of Estimates The preparation of the unaudited consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and condensed notes. Actual results could materially differ from those estimates. Real Estate Liquidation Basis of Accounting As of April 1, 2023, the Company’s investments in real estate were adjusted to their estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash or other consideration the Company expects to realize through the disposal of its assets, including any residual value attributable to lease intangibles, as it carries out the Plan of Liquidation. The Company estimated the liquidation value of its investments in real estate generally based on offers the Company received for the sale of three of its properties, which the Company is marketing for sale. Subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer on that date. As a result, as of June 30, 2023, the Company estimated the liquidation value of the Commonwealth Building based on the outstanding principal balance of the Commonwealth Building Mortgage Loan as of June 30, 2023, net of other assets and liabilities of the Commonwealth Building. The liquidation values of the Company’s investments in real estate are presented on an undiscounted basis and investments in real estate are no longer depreciated. Subsequent to April 1, 2023, all changes in the estimated liquidation value of the investments in real estate are reflected as a change to the Company’s net assets in liquidation. Rents and Other Receivables In accordance with the liquidation basis of accounting, as of April 1, 2023, rents and other receivables were adjusted to their net realizable value. The Company periodically evaluates the collectibility of amounts due from tenants. Any changes in the collectibility of the receivables are reflected as a change to the Company’s net assets in liquidation. Revenue Recognition Liquidation Basis of Accounting Under the liquidation basis of accounting, the Company has accrued all income that it expects to earn through the completion of its liquidation to the extent it has a reasonable basis for estimation. Revenue from tenants is estimated based on the contractual in-place leases and projected leases through the anticipated disposition date of the property. These amounts are presented net of estimated expenses and other liquidation costs and are classified in liabilities for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets. Accrued Liquidation Costs In accordance with the liquidation basis of accounting, the Company accrues for certain estimated liquidation costs to the extent it has a reasonable basis for estimation. These consist of legal fees, dissolution costs, final audit/tax costs, insurance, and transfer agent related costs.
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LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION |
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Liability during Liquidation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION | LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Liquidation. As of June 30, 2023, the Company estimated that it will have costs in excess of estimated receipts during the liquidation process. These amounts can vary significantly due to, among other things, the timing and estimates for executing and renewing leases, estimates of tenant improvement costs and capital expenditures, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding down of operations. These costs are estimated and are anticipated to be paid out over the liquidation period. Upon transition to the liquidation basis of accounting on April 1, 2023, the Company accrued the following revenues and expenses expected to be incurred during liquidation (in thousands):
The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of June 30, 2023 is as follows (in thousands):
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NET ASSETS IN LIQUIDATION |
6 Months Ended |
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Jun. 30, 2023 | |
Assets in Liquidation [Abstract] | |
NET ASSETS IN LIQUIDATION | NET ASSETS IN LIQUIDATIONThe net assets in liquidation as of June 30, 2023 would result in the payment of estimated liquidating distributions of approximately $0.14 per share of common stock to the Company’s stockholders of record as of June 30, 2023. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the estimated period required to complete the Plan of Liquidation. There is inherent uncertainty with these estimates and projections, and they could change materially based on the timing of the disposition or transfer of the Company’s remaining real estate properties, the performance of the Company’s remaining assets and any changes in the underlying assumptions of the projected cash flows from such properties. See Note 2, “Plan of Liquidation.” |
REAL ESTATE |
6 Months Ended |
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Jun. 30, 2023 | |
Real Estate [Abstract] | |
REAL ESTATE | REAL ESTATE As of June 30, 2023, the Company’s portfolio of real estate was composed of four office buildings containing 599,030 rentable square feet, which were collectively 69.0% occupied. Information presented in this Note 6 includes the Commonwealth Building; however, subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer. See Note 10, “Subsequent Events – Foreclosure of the Commonwealth Building.” The Company’s portfolio of real estate, excluding the Commonwealth Building, contains 374,908 rentable square feet, which were collectively 86.1% occupied. As of June 30, 2023, the Company’s liquidation value of real estate was $102.9 million, or $53.9 million, excluding the Commonwealth Building. As a result of adopting the liquidation basis of accounting in April 2023, as of June 30, 2023, real estate properties were recorded at their estimated liquidation value, which represents the estimated gross amount of cash or other consideration the Company expects to realize through the disposition or transfer of its real estate properties owned as of June 30, 2023 as it carries out its Plan of Liquidation.
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NOTES PAYABLE |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE | NOTES PAYABLE As of June 30, 2023 and December 31, 2022, the Company’s notes payable consisted of the following (dollars in thousands):
_____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2023. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2023 using interest rate indices as of June 30, 2023. (2) Represents the maturity date as of June 30, 2023. (3) The interest rate under this loan is calculated at a variable rate of 180 basis points over one-month LIBOR (the “Commonwealth Interest Rate”), but at no point shall the interest rate be less than 2.05%. On December 22, 2022, the borrower under the Commonwealth Building Mortgage Loan (the “Commonwealth Borrower”) defaulted on the loan as a result of a failure to pay the full amount of the outstanding debt service due on the loan. Effective February 13, 2023, the Commonwealth Borrower is in maturity default for failure to pay the amount of the debt outstanding and due to the lender on the February 1, 2023 maturity date. During the time the default exists, the interest rate under this loan is calculated at the Commonwealth Interest Rate, plus 4%. Subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer. See Note 10, “Subsequent Events – Foreclosure of the Commonwealth Building.” (4) The Modified Term Loan bears interest at the forward-looking term rate based on Secured Overnight Financing Rate (“SOFR”) with a tenor comparable to the one-month Term SOFR plus 10 basis points (collectively, the “Adjusted Term SOFR”) plus 200 basis points per annum prior to May 9, 2023. On and after May 9, 2023, the Modified Term Loan will bear interest at Adjusted Term SOFR plus 250 basis points per annum. On a monthly basis, any excess cash flow (as defined in the modification agreement) from the Offices at Greenhouse and the Institute Property is required to be deposited into an account which will serve as additional security for the Modified Term Loan. Subject to certain terms and conditions contained in the loan documents, cash currently held by the Company may only be used for the Company’s operating costs including but not limited to the Company’s general and administrative costs, liquidation costs, capital costs and any other reasonable costs and expenses required to maintain the Company as a going concern (collectively “REIT Operating Costs”), but for no other purpose. Further, the Company is required to deposit any cash amount held by the Company exceeding $7.0 million into an account controlled by the lender or apply it to pay down the Modified Term Loan. The Modified Term Loan is full recourse under the guaranty provided by KBS GI REIT Properties. (5) Monthly payments for the 210 W. Chicago Mortgage Loan include principal and interest with principal payments calculated using an amortization schedule of 25 years at an interest rate of 6.0%, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity. On June 7, 2023, the borrower under the 210 W. Chicago Mortgage Loan entered into an early opt-in election and related amendment to the loan agreement with the lender which modified the interest rate to Adjusted Term SOFR plus 220 basis points per annum. (6) As described in Note 3, “Summary of Significant Accounting Policies - Principles of Consolidation and Basis of Presentation,” on April 1, 2023, the Company adopted the liquidation basis of accounting which requires the Company to record notes payable at their contractual amounts. During the three months ended March 31, 2023 and the three and six months ended June 30, 2022, the Company incurred $2.2 million, $0.7 million and $1.1 million of interest expense, respectively. As of June 30, 2023 and December 31, 2022, $0.8 million and $0.6 million of interest expense were payable, respectively. Included in interest expense during each of the three months ended March 31, 2023 and the three and six months ended June 30, 2022 were $0.1 million of amortization of deferred financing costs. Interest expense (including gains and losses) incurred as a result of the Company’s derivative instruments decreased interest expense by $0.1 million and $0.2 million for the three and six months ended June 30, 2022, respectively.
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RELATED PARTY TRANSACTIONS |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Pursuant to the Advisory Agreement, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). The Company is also obligated to reimburse the Advisor for certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. In addition, in connection with property acquisitions, the Company, through indirect wholly owned subsidiaries, has entered into separate Property Management Agreements (defined below) with KBS Management Group, LLC, an affiliate of the Advisor (the “Co-Manager”). The Company has also entered into a fee reimbursement agreement with KBS Capital Markets Group LLC (the “Dealer Manager”) pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor also serves or served as the advisor for KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”) (liquidated May 2023) and KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”). The Dealer Manager also served as the dealer manager for KBS REIT II and KBS REIT III. As of January 1, 2022, the Company, together with KBS REIT II, KBS REIT III, the Dealer Manager, the Advisor and other KBS affiliated entities, had entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage were 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 program and is billed directly to each entity. At renewal on June 30, 2022, due to its liquidation, KBS REIT II elected to cease participation in the program and obtained separate insurance coverage. In connection with the Company’s liquidation, the Company ceased participation in the program as of June 30, 2023 and obtained separate insurance coverage. During the six months ended June 30, 2023 and 2022, no other business transactions occurred between the Company and KBS REIT II and KBS REIT III. Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and six months ended June 30, 2023 and 2022, and any related amounts receivable and payable as of June 30, 2023 and December 31, 2022 (in thousands).
_____________________ (1) The asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. For the period from October 2017 through September 2022, the Company had accrued and deferred payment of $8.9 million of asset management fees. In January 2023, the Advisor waived payment of its asset management fees from October 1, 2022 through the Company’s liquidation and waived $3.0 million of accrued asset management fees and as a result, as of June 30, 2023, the Company had $5.9 million of accrued asset management fees payable to the Advisor. For purposes of the consolidated statement of net assets as of June 30, 2023 and consolidated statement of changes in net assets for the period April 1, 2023 to June 30, 2023, the Company has estimated the asset management fee payable to the Advisor to be $0, as the Advisor has informed the Company it will not seek payment for the deferred asset management fees based on the current estimated values of the real estate properties and estimated net assets in liquidation. To the extent the estimated values of the real estate properties and estimated net assets in liquidation are significantly greater than the amounts shown in the liquidation basis condensed consolidated statement of net assets, the Advisor may request payment of some or all of the remaining $5.9 million deferred asset management fees. (2) See “Reimbursable Operating Expenses” below. (3) See “Real Estate Property Co-Management Agreements” below. The Co-Manager has waived payment of its property management fees effective October 1, 2022 through the Company’s liquidation. Reimbursable Operating Expenses Reimbursable operating expenses primarily related to directors and officers liability insurance, legal fees, state and local taxes, accounting software and cybersecurity 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. These amounts totaled $15,000 and $31,000 for the three and six months ended June 30, 2023, respectively, and $47,000 and $73,000 for the three and six months ended June 30, 2022, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the periods. The Company does not reimburse for employee costs in connection with services for which the Advisor earned or earns acquisition, origination 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. The Advisor must reimburse the Company the amount by which the Company’s aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended June 30, 2023 did not exceed the charter-imposed limitation. Real Estate Property Co-Management Agreements In connection with its property acquisitions, the Company, through separate, indirect, wholly-owned subsidiaries, entered into separate property management agreements (each, a “Property Management Agreement”) with the Co-Manager for each of its properties. Under each Property Management Agreement, the Co-Manager will provide certain management services related to these properties in addition to those provided by the third-party property managers. In exchange for these services, the Company pays the Co-Manager a monthly fee equal to a percentage of the rent, payable and actually collected for the month from each of the properties. Each Property Management Agreement has an initial term of one year and will be deemed renewed for successive one-year periods provided it is not terminated. Each party may terminate the Property Management Agreement without cause on 30 days’ written notice to the other party and may terminate each Property Management Agreement for cause on 5 days’ written notice to the other party upon the occurrence of certain events as detailed in each Property Management Agreement. The Co-Manager has waived payment of its property management fees effective October 1, 2022 through the Company’s liquidation.
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Economic Dependency The Company depends on the Advisor for certain services that are essential to the Company, including the management of the daily operations of the Company’s investment portfolio, disposition of investments and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources. Legal Matters From time to time, the Company may become 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 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. 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. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities.
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the consolidated financial statements are issued. Foreclosure of the Commonwealth Building As previously disclosed, on February 13, 2023, the Commonwealth Borrower was in maturity default with respect to the Commonwealth Building Mortgage Loan following its failure to pay the amount of the debt outstanding on the loan on its February 1, 2023 due date. On July 18, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer on that date and the Commonwealth Borrower was relieved of all debt obligations and future liabilities associated with the Commonwealth Building in conjunction with the foreclosure transaction.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
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”), including Subtopic 205-30, “Liquidation Basis of Accounting,” as indicated, and the rules and regulations of the Securities and Exchange Commission, 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. |
Principles of Consolidation | The Company’s consolidated financial statements included its accounts and the accounts of REIT Holdings, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions were eliminated in consolidation. |
Use of Estimates | The preparation of the unaudited consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and condensed notes. Actual results could materially differ from those estimates. |
Real Estate | Liquidation Basis of Accounting As of April 1, 2023, the Company’s investments in real estate were adjusted to their estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash or other consideration the Company expects to realize through the disposal of its assets, including any residual value attributable to lease intangibles, as it carries out the Plan of Liquidation. The Company estimated the liquidation value of its investments in real estate generally based on offers the Company received for the sale of three of its properties, which the Company is marketing for sale. Subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer on that date. As a result, as of June 30, 2023, the Company estimated the liquidation value of the Commonwealth Building based on the outstanding principal balance of the Commonwealth Building Mortgage Loan as of June 30, 2023, net of other assets and liabilities of the Commonwealth Building. The liquidation values of the Company’s investments in real estate are presented on an undiscounted basis and investments in real estate are no longer depreciated. Subsequent to April 1, 2023, all changes in the estimated liquidation value of the investments in real estate are reflected as a change to the Company’s net assets in liquidation.
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Rents and Other Receivables | In accordance with the liquidation basis of accounting, as of April 1, 2023, rents and other receivables were adjusted to their net realizable value. The Company periodically evaluates the collectibility of amounts due from tenants. Any changes in the collectibility of the receivables are reflected as a change to the Company’s net assets in liquidation. |
Revenue Recognition | Revenue Recognition Liquidation Basis of Accounting Under the liquidation basis of accounting, the Company has accrued all income that it expects to earn through the completion of its liquidation to the extent it has a reasonable basis for estimation. Revenue from tenants is estimated based on the contractual in-place leases and projected leases through the anticipated disposition date of the property. These amounts are presented net of estimated expenses and other liquidation costs and are classified in liabilities for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets.
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Accrued Liquidation Costs | In accordance with the liquidation basis of accounting, the Company accrues for certain estimated liquidation costs to the extent it has a reasonable basis for estimation. These consist of legal fees, dissolution costs, final audit/tax costs, insurance, and transfer agent related costs. |
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION (Tables) |
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Liability during Liquidation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Revenues and Expenses to be Incurred During Liquidation | Upon transition to the liquidation basis of accounting on April 1, 2023, the Company accrued the following revenues and expenses expected to be incurred during liquidation (in thousands):
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Summary of Changes in Liquidation Accrual of Company | The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of June 30, 2023 is as follows (in thousands):
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NOTES PAYABLE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | As of June 30, 2023 and December 31, 2022, the Company’s notes payable consisted of the following (dollars in thousands):
_____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2023. Effective interest rate is calculated as the actual interest rate in effect as of June 30, 2023 using interest rate indices as of June 30, 2023. (2) Represents the maturity date as of June 30, 2023. (3) The interest rate under this loan is calculated at a variable rate of 180 basis points over one-month LIBOR (the “Commonwealth Interest Rate”), but at no point shall the interest rate be less than 2.05%. On December 22, 2022, the borrower under the Commonwealth Building Mortgage Loan (the “Commonwealth Borrower”) defaulted on the loan as a result of a failure to pay the full amount of the outstanding debt service due on the loan. Effective February 13, 2023, the Commonwealth Borrower is in maturity default for failure to pay the amount of the debt outstanding and due to the lender on the February 1, 2023 maturity date. During the time the default exists, the interest rate under this loan is calculated at the Commonwealth Interest Rate, plus 4%. Subsequent to June 30, 2023, the Commonwealth Building was sold at public auction in a foreclosure sale to a buyer affiliated with the Commonwealth Lender and all interest in the Commonwealth Building was transferred to the buyer. See Note 10, “Subsequent Events – Foreclosure of the Commonwealth Building.” (4) The Modified Term Loan bears interest at the forward-looking term rate based on Secured Overnight Financing Rate (“SOFR”) with a tenor comparable to the one-month Term SOFR plus 10 basis points (collectively, the “Adjusted Term SOFR”) plus 200 basis points per annum prior to May 9, 2023. On and after May 9, 2023, the Modified Term Loan will bear interest at Adjusted Term SOFR plus 250 basis points per annum. On a monthly basis, any excess cash flow (as defined in the modification agreement) from the Offices at Greenhouse and the Institute Property is required to be deposited into an account which will serve as additional security for the Modified Term Loan. Subject to certain terms and conditions contained in the loan documents, cash currently held by the Company may only be used for the Company’s operating costs including but not limited to the Company’s general and administrative costs, liquidation costs, capital costs and any other reasonable costs and expenses required to maintain the Company as a going concern (collectively “REIT Operating Costs”), but for no other purpose. Further, the Company is required to deposit any cash amount held by the Company exceeding $7.0 million into an account controlled by the lender or apply it to pay down the Modified Term Loan. The Modified Term Loan is full recourse under the guaranty provided by KBS GI REIT Properties. (5) Monthly payments for the 210 W. Chicago Mortgage Loan include principal and interest with principal payments calculated using an amortization schedule of 25 years at an interest rate of 6.0%, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity. On June 7, 2023, the borrower under the 210 W. Chicago Mortgage Loan entered into an early opt-in election and related amendment to the loan agreement with the lender which modified the interest rate to Adjusted Term SOFR plus 220 basis points per annum. (6) As described in Note 3, “Summary of Significant Accounting Policies - Principles of Consolidation and Basis of Presentation,” on April 1, 2023, the Company adopted the liquidation basis of accounting which requires the Company to record notes payable at their contractual amounts.
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RELATED PARTY TRANSACTIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 six months ended June 30, 2023 and 2022, and any related amounts receivable and payable as of June 30, 2023 and December 31, 2022 (in thousands).
_____________________ (1) The asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. For the period from October 2017 through September 2022, the Company had accrued and deferred payment of $8.9 million of asset management fees. In January 2023, the Advisor waived payment of its asset management fees from October 1, 2022 through the Company’s liquidation and waived $3.0 million of accrued asset management fees and as a result, as of June 30, 2023, the Company had $5.9 million of accrued asset management fees payable to the Advisor. For purposes of the consolidated statement of net assets as of June 30, 2023 and consolidated statement of changes in net assets for the period April 1, 2023 to June 30, 2023, the Company has estimated the asset management fee payable to the Advisor to be $0, as the Advisor has informed the Company it will not seek payment for the deferred asset management fees based on the current estimated values of the real estate properties and estimated net assets in liquidation. To the extent the estimated values of the real estate properties and estimated net assets in liquidation are significantly greater than the amounts shown in the liquidation basis condensed consolidated statement of net assets, the Advisor may request payment of some or all of the remaining $5.9 million deferred asset management fees. (2) See “Reimbursable Operating Expenses” below. (3) See “Real Estate Property Co-Management Agreements” below. The Co-Manager has waived payment of its property management fees effective October 1, 2022 through the Company’s liquidation.
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Schedule of Annual Fee Percentage |
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PLAN OF LIQUIDATION (Details) |
May 09, 2023 |
---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Plan of liquidation, distribution of net proceeds, period | 24 months |
NET ASSETS IN LIQUIDATION (Details) |
Jun. 30, 2023
$ / shares
|
---|---|
Assets in Liquidation [Abstract] | |
Common stock, additional estimated liquidation distribution (usd per share) | $ 0.14 |
REAL ESTATE (Details) $ in Millions |
Jun. 30, 2023
USD ($)
ft²
property
|
---|---|
Real Estate Properties [Line Items] | |
Percentage of real estate occupied, excluding commonwealth building | 86.10% |
Area real property, excluding commonwealth building | ft² | 374,908 |
Real estate liquidation value | $ | $ 102.9 |
Real estate liquidation value excluding commonwealth building | $ | $ 53.9 |
Office Building | |
Real Estate Properties [Line Items] | |
Number of real estate properties | property | 4 |
Rentable square feet | ft² | 599,030 |
Percentage of real estate occupied | 69.00% |
NOTES PAYABLE - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2023 |
Jun. 30, 2022 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Dec. 31, 2022 |
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Derivative [Line Items] | |||||
Interest expense | $ 2,244 | $ 689 | $ 1,141 | ||
Interest payable, current | $ 800 | $ 600 | |||
Amortization of deferred financing costs | $ 27 | 100 | 111 | ||
Interest Rate Swap | |||||
Derivative [Line Items] | |||||
Decrease in interest expense as a result of derivatives | $ 100 | $ 200 |
RELATED PARTY TRANSACTIONS - Additional Information (Details) - Advisor and Dealer Manager - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
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Related Party Transaction [Line Items] | ||||
Related party transaction amount | $ 18 | $ 504 | $ 34 | $ 990 |
Limit of total operating expenses as a percent of average invested assets (percent) | 2.00% | 2.00% | ||
Limit of total operating expenses as a percent of net income (percent) | 25.00% | 25.00% | ||
Employee Costs Reimbursed Under the Advisory Agreement | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction amount | $ 15 | $ 47 | $ 31 | $ 73 |
RELATED PARTY TRANSACTIONS - Real Estate Property Co-Management Agreements (Details) - KBS Management Group, LLC |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Related Party Transaction [Line Items] | |
Initial term of management agreements | 1 year |
Successive periods, renewal | 1 year |
Period of termination notice | 30 days |
Period of termination notice with cause | 5 days |
Related Party | Commonwealth Building | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 1.25% |
Related Party | The Offices at Greenhouse | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 0.25% |
Related Party | Institute Property | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 1.00% |
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