UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

    

FORM 8-K/A
    

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 4, 2012

KBS STRATEGIC OPPORTUNITY REIT, INC.
(Exact name of registrant specified in its charter)
    

Maryland
000-54382
26-3842535
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(IRS Employer
Identification No.)

620 Newport Center Drive, Suite 1300
Newport Beach, California 92660
(Address of principal executive offices)

Registrant’s telephone number, including area code: (949) 417-6500

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On December 4, 2012, KBS Strategic Opportunity REIT, Inc. (the “Company”), through an indirect wholly owned subsidiary, acquired an office building containing 400,101 rentable square feet located on approximately 1.9 acres of land in Houston, Texas (the “1800 West Loop Building”). The Company hereby amends the Form 8-K dated November 20, 2012 to provide the required financial information related to its acquisition of 1800 West Loop Building.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)
Financial Statements of Real Estate Acquired
 
 
 
 
 
1800 West Loop Building
 
 
 
 
 
 
 
 
 
 
(b)
Pro Forma Financial Information
 
 
 
 
 
KBS Strategic Opportunity REIT, Inc.
 
 
 
 
 
 
F-6
 
F-8
 
F-10




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
KBS STRATEGIC OPPORTUNITY REIT, INC.
 
 
 
Dated: January 17, 2013
 
BY:
 
/s/ David E. Snyder
 
 
 
 
David E. Snyder
 
 
 
 
Chief Financial Officer
 
 
 
 
 







REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
KBS Strategic Opportunity REIT, Inc.

We have audited the accompanying statement of revenues over certain operating expenses of the 1800 West Loop Building for the year ended December 31, 2011. This statement is the responsibility of the 1800 West Loop Building’s management. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues over certain operating expenses is free of material misstatement. We were not engaged to perform an audit of the 1800 West Loop Building’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 1800 West Loop Building’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues over certain operating expenses, assessing the accounting principles used and significant estimates made by management, and evaluating the overall presentation of the statement of revenues over certain operating expenses. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues over certain operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2, and is not intended to be a complete presentation of the 1800 West Loop Building’s revenues and expenses.
In our opinion, the statement of revenues over certain operating expenses referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 2 of the 1800 West Loop Building for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.


/s/ Ernst & Young LLP


Irvine, California
January 17, 2013


F-1


1800 WEST LOOP BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
(in thousands)
 
 
Nine Months Ended
September 30, 2012
 
Year Ended
December 31, 2011
 
 
(unaudited)
 
 
Revenues:
 
 
 
 
Rental income
 
$
5,276

 
$
7,188

Tenant reimbursements and other revenue
 
397

 
900

Parking revenue
 
239

 
382

Total revenues
 
5,912

 
8,470

Expenses:
 
 
 
 
Real estate taxes and insurance
 
1,139

 
1,493

Repairs and maintenance
 
551

 
668

Utilities
 
489

 
668

General and administrative
 
437

 
590

Cleaning
 
290

 
375

Security
 
222

 
290

Total expenses
 
3,128

 
4,084

Revenues over certain operating expenses
 
$
2,784

 
$
4,386


See accompanying notes.

F-2


1800 WEST LOOP BUILDING
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 2011
and the Nine Months Ended September 30, 2012 (unaudited)


1.
DESCRIPTION OF REAL ESTATE PROPERTY
On December 4, 2012, KBS Strategic Opportunity REIT, Inc. (“KBS SOR”), through an indirect wholly owned subsidiary, acquired an office building containing 400,101 rentable square feet located on approximately 1.9 acres of land in Houston, Texas (the “1800 West Loop Building”) from 1800 West Loop Houston LTD (the “Seller”). The seller is not affiliated with KBS SOR or KBS Capital Advisors LLC, KBS SOR’s external advisor. The contractual purchase price of the 1800 West Loop Building was $68.5 million plus closing costs.
KBS SOR is a Maryland corporation formed 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.    
2.
BASIS OF PRESENTATION
The accompanying statements of revenues over certain operating expenses have been prepared to comply with the rules and regulations of the Securities and Exchange Commission (“SEC”).
The 1800 West Loop Building is not a legal entity and the accompanying statements of revenues over certain operating expenses are not representative of the actual operations for the periods presented, as certain revenues and expenses have been excluded that may not be comparable to the revenues and expenses the Company expects to incur in the future operations of the 1800 West Loop Building. Excluded items include interest, depreciation and amortization, and general and administrative costs not directly comparable to the future operations of the 1800 West Loop Building.
The accompanying unaudited statement of revenues over certain operating expenses has 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 8-K and Article 3-14 of Regulation S-X. Accordingly, the unaudited statement of revenues over certain operating expenses does not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the statement of revenues over certain operating expenses for the unaudited interim period presented includes all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such period. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
An audited statement of revenues over certain operating expenses is being presented for the most recent fiscal year available instead of the three most recent years based on the following factors: (i) the 1800 West Loop Building was acquired from an unaffiliated party and (ii) based on due diligence of the 1800 West Loop Building by KBS SOR, management is not aware of any material factors relating to the 1800 West Loop Building that would cause this financial information not to be indicative of future operating results.
Square footage, acreage, occupancy and other measures used to describe real estate included in these notes to the statements of revenues over certain operating expenses are presented on an unaudited basis.
3.
SIGNIFICANT ACCOUNTING POLICIES
Rental Revenues
Minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, is recognized on a straight-line basis over the term of the related lease and amounts expected to be received in later years are recorded as deferred rent. The adjustment to record deferred rent increased rental revenue by $0.1 million and $0.3 million for the year ended December 31, 2011 and the nine months ended September 30, 2012 (unaudited), respectively.

F-3


1800 WEST LOOP
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES (CONTINUED)
For the Year Ended December 31, 2011
and the Nine Months Ended September 30, 2012 (unaudited)

Use of Estimates
The preparation of financial statements, as described in Note 2 and in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
4.
DESCRIPTION OF LEASING ARRANGEMENTS
As of December 31, 2011, the 1800 West Loop Building was 76% leased by 38 tenants. For the year ended December 31, 2011, the 1800 West Loop Building earned approximately 24% of its rental income from a tenant in the marketing industry and a tenant in the professional services industry.
The tenant in the marketing industry occupies 39,596 rentable square feet, or approximately 10% of the total rentable square feet. Its lease expires on October 31, 2018, with one five-year extension option. For the year ended December 31, 2011, the 1800 West Loop Building earned 14% of its rental income from this tenant.
The tenant in the professional services industry occupied 41,630 rentable square feet, or approximately 10% of the total rentable square feet. Its lease expired on December 5, 2012. For the year ended December 31, 2011, the 1800 West Loop Building earned 10% of its rental income from this tenant.
No other tenant leases represented more than 10% of rental income for the year ended December 31, 2011.
5.
FUTURE MINIMUM RENTAL COMMITMENTS
As of December 31, 2011, the future minimum rental receipts due under non-cancelable operating leases for the years ending December 31 were as follows (in thousands):
2012
$
6,762

2013
6,714

2014
6,898

2015
6,676

2016
6,170

Thereafter
16,272

 
$
49,492

6.
COMMITMENTS AND CONTINGENCIES
Tenant Lease Termination Options
Certain tenants have lease termination options built into their leases, which are subject to termination fees. In the event that a tenant does exercise its option to terminate its lease early and the terminated space is not subsequently leased out, the total amount of future minimum rent received by the 1800 West Loop Building will be reduced. For the year ended December 31, 2011, the 1800 West Loop Building recognized $0.5 million of tenant lease termination income and is included in tenant reimbursements and other revenue on the accompanying statements of revenues over certain operating expenses.
Environmental
The 1800 West Loop Building is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the 1800 West Loop Building’s financial condition and results of operations as of December 31, 2011.
7.
SUBSEQUENT EVENTS
KBS SOR evaluates subsequent events up until the date the statements of revenues over certain operating expenses are issued. The accompanying statements of revenues over certain operating expenses were issued on January 17, 2013.

F-4


KBS STRATEGIC OPPORTUNITY REIT, INC.
SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following pro forma information should be read in conjunction with the consolidated balance sheets of KBS Strategic Opportunity REIT, Inc. (“KBS SOR”) as of December 31, 2011 and September 30, 2012, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2011 and for the three and nine months ended September 30, 2012, and the notes thereto. The consolidated financial statements of KBS SOR as of and for the year ended December 31, 2011 and the consolidated financial statements as of and for the three and nine months ended September 30, 2012 have been included in KBS SOR’s prior filings with the SEC. In addition, this pro forma information should be read in conjunction with the statements of revenues over certain operating expenses and the notes thereto of the Bellevue Technology Center, which have been filed with the SEC on September 26, 2012 and the statements of revenues over certain operating expenses and the notes thereto of the 1800 West Loop Building, which are included herein.
The unaudited pro forma balance sheet as of September 30, 2012 has been prepared to give effect to the acquisition of 1800 West Loop Building as if the acquisition occurred on September 30, 2012.
The unaudited pro forma statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 have been prepared to give effect to the acquisitions of (i) the Bellevue Technology Center and (ii) the 1800 West Loop Building as if these acquisitions occurred on January 1, 2011.
These unaudited pro forma financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisitions of the Bellevue Technology Center and the 1800 West Loop Building been consummated as of January 1, 2011. In addition, the pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisition. These preliminary estimates may be adjusted in the future upon finalization of the purchase accounting.


F-5


KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2012
(in thousands, except share and per share amounts)

 
 
KBS Strategic Opportunity REIT
Historical (a)
 
Pro Forma Adjustments
 
 
Pro Forma Total
 
 
 
1800 West Loop Building (b)
 
 
Assets
 
 
 
 
 
 
 
Real estate, net
 
$
199,738

 
$
67,652

(c)
 
$
267,390

Real estate loan receivable, net
 
71,034

 

 
 
71,034

Real estate securities ($0 pledged under repurchase agreements)
 
24,213

 

 
 
24,213

Total real estate and real estate-related investments, net
 
294,985

 
67,652

(c)
 
362,637

Cash and cash equivalents
 
66,185

 
(66,185
)
 
 

Investment in unconsolidated joint venture
 
7,926

 

 
 
7,926

Rents and other receivables, net
 
1,971

 

 
 
1,971

Above-market leases, net
 
2,960

 

 
 
2,960

Prepaid expenses and other assets
 
4,092

 

 
 
4,092

Total assets
 
$
378,119

 
$
1,467

 
 
$
379,586

Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Notes payable and repurchase agreements:
 
 
 
 
 
 
 
Notes payable
 
$
31,576

 
$

 
 
$
31,576

Repurchase agreements on real estate securities
 

 

 
 

Total notes payable and repurchase agreements
 
31,576

 

 
 
31,576

Accounts payable and accrued liabilities
 
5,247

 

 
 
5,247

Due to affiliates
 
4

 

 
 
4

Below-market leases, net
 
262

 
592

(c)
 
854

Security deposits and other liabilities
 
1,290

 

 
 
1,290

Total liabilities
 
38,379

 
592

 
 
38,971

Commitments and contingencies
 
 
 
 
 
 
 
Redeemable common stock
 
13,293

 

 
 
13,293

Equity
 
 
 
 
 
 
 
KBS Strategic Opportunity REIT, Inc. stockholders’ equity
 
 
 
 
 
 
 
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding
 

 

 
 

Common stock, $.01 par value; 1,000,000,000 shares authorized, 40,845,175 shares issued and outstanding, 41,006,916 pro forma shares
 
408

 
1

(d)
 
409

Additional paid-in capital
 
347,118

 
874

(d)
 
347,992

Cumulative distributions and net losses
 
(35,844
)
 

 
 
(35,844
)
Accumulated other comprehensive gain
 
232

 

 
 
232

Total KBS Strategic Opportunity REIT, Inc. stockholders’ equity
 
311,914

 
875

 
 
312,789

Noncontrolling interests
 
14,533

 

 
 
14,533

Total equity
 
326,447

 
875

 
 
327,322

Total liabilities and stockholders’ equity
 
$
378,119

 
$
1,467

 
 
$
379,586



F-6


KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
As of September 30, 2012

(a)
Historical financial information derived from KBS SOR’s Quarterly Report on Form 10-Q as of September 30, 2012.
(b)
Represents the acquisition of the 1800 West Loop Building. The purchase price (net of closing credits) of the 1800 West Loop Building was $67.1 million. This amount was funded from cash available from proceeds, net of offering costs, from KBS SOR’s initial public offering through the acquisition date.
(c)
KBS SOR determined the cost of tangible assets, identifiable intangibles and assumed liabilities (consisting of below-market leases and tenant origination and absorption costs) acquired in the business combination based on their estimated fair values. The purchase accounting for these acquisitions is preliminary and subject to change.
(d)
Represents additional proceeds, net of offering costs, from KBS SOR’s initial public offering necessary to fund the acquisition of the 1800 West Loop Building as of the pro forma date of September 30, 2012.


F-7


KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2012
(in thousands, except share and per share amounts)

 
 
KBS Strategic Opportunity REIT
Historical (a)
 
Pro Forma Adjustments
 
 
 
 
 
 
Bellevue Technology Center
 
1800 West Loop
 
 
Pro Forma Total
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
 
$
9,334

 
$
2,455

(b) (c)
$
5,540

(b)
 
$
17,329

Tenant reimbursements
 
1,051

 
737

(d)
195

(d)
 
1,983

Interest income from real estate loans receivable
 
231

 

 

 
 
231

Interest income from real estate securities
 
855

 

 

 
 
855

Other operating income
 
107

 
70

(e)
441

(e)
 
618

Total revenues
 
11,578

 
3,262

 
6,176

 
 
21,016

Expenses:
 
 
 
 
 
 
 
 
 
Operating, maintenance, and management
 
5,481

 
1,217

(f)
1,989

(f)
 
8,687

Real estate taxes and insurance
 
1,742

 
422

(g)
1,139

(g)
 
3,303

Asset management fees to affiliate
 
1,099

 
343

(h)
384

(h)
 
1,826

Real estate acquisition fee and expenses
 
388

 
(238
)
 

 
 
150

Real estate acquisition fee and expenses to affiliate
 
1,040

 
(789
)
 

 
 
251

Costs related to foreclosure of loans receivable
 

 

 

 
 

General and administrative expenses
 
2,445

 

 

 
 
2,445

Depreciation and amortization
 
6,350

 
1,156

(i)
1,792

(i)
 
9,298

Interest expense
 
1,918

 

 

 
 
1,918

Total expenses
 
20,463

 
2,111

 
5,304

 
 
27,878

Other income:
 
 
 
 
 
 
 
 
 
Other interest income
 
63

 

 

 
 
63

Gain from extinguishment of debt
 
581

 

 

 
 
581

Income from unconsolidated joint venture
 
116

 

 

 
 
116

Gain on early payoff of real estate loan receivable
 
359

 

 

 
 
359

Total other income
 
1,119

 

 

 
 
1,119

(Loss) income from continuing operations
 
(7,766
)
 
1,151

 
872

 
 
(5,743
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
Gain on sale of real estate, net
 
593

 

 

 
 
593

Total income from discontinued operations
 
593

 

 

 
 
593

Net (loss) income
 
(7,173
)
 
1,151

 
872

 
 
(5,150
)
Net loss attributable to noncontrolling interests
 
182

 

 

 
 
182

Net (loss) income attributable to common stockholders
 
$
(6,991
)
 
$
1,151

 
$
872

 
 
$
(4,968
)
Basic and diluted income (loss) per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
 
(0.26
)
 
 
 
 
 
 
(0.13
)
Discontinued operations
 
0.02

 
 
 
 
 
 
0.01

Net loss per common share
 
$
(0.24
)
 
 
 
 
 
 
$
(0.12
)
Weighted-average number of common shares outstanding, basic and diluted
 
29,732,658

 
 
 
 
 
 
41,006,916





F-8


KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2012



(a)
Historical financial information derived from KBS SOR’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012.
(b)
Represents base rental income (not reflected in the historical statement of operations of KBS SOR), including amortization of above-market lease assets and below-market lease liabilities, for the nine months ended September 30, 2012. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2011. Above-market lease assets and below-market lease liabilities are amortized over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.
(c)
The seller of the Bellevue Technology Center entered into an agreement to lease 67,378 rentable square feet as of the date of acquisition. The pro forma adjustment assumes the same lease was entered into on the pro forma acquisition date of January 1, 2011.
(d)
Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners.
(e)
Represents other operating income from tenants (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners.
(f)
Represents operating expenses (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012, based on historical operations of the previous owners.
(g)
Represents real estate taxes and insurance expense (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012 based on historical operations of the previous owners.
(h)
Represents asset management fees (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012 that would have been due to affiliates of KBS SOR had the asset been acquired on January 1, 2011. With respect to investments in real property, the asset management fee is a monthly fee paid to KBS SOR’s advisor equal to one-twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS SOR’s advisor.
(i)
Represents depreciation and amortization expense (not reflected in the historical statement of operations of KBS SOR) for the nine months ended September 30, 2012. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the shorter of the life of the lease or the expected useful life. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease, including any below-market renewal periods.

F-9


KBS STRATEGIC OPPORTUNITY REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(in thousands, except share and per share amounts)

 
 
KBS Strategic Opportunity REIT
Historical (a)
 
Pro Forma Adjustments
 
 
 
 
 
 
Bellevue Technology Center
 
1800 West Loop
 
 
Pro Forma Total
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
 
$
3,595

 
$
4,545

(b) (c)
$
7,286

(b)
 
$
15,426

Tenant reimbursements
 
276

 
1,358

(d)
272

(d)
 
1,906

Interest income from real estate loans receivable
 
311

 

 

 
 
311

Interest income from real estate securities
 
53

 

 

 
 
53

Other operating income
 
43

 
127

(e)
1,010

(e)
 
1,180

Total revenues
 
4,278

 
6,030

 
8,568

 
 
18,876

Expenses:
 
 
 
 
 
 
 
 
 
Operating, maintenance, and management
 
2,957

 
2,247

(f)
2,591

(f)
 
7,795

Real estate taxes and insurance
 
888

 
719

(g)
1,493

(g)
 
3,100

Asset management fees to affiliate
 
328

 
592

(h)
512

(h)
 
1,432

Real estate acquisition fee and expenses
 
1,139

 

 

 
 
1,139

Real estate acquisition fee and expenses to affiliate
 
460

 

 

 
 
460

Costs related to foreclosure of loans receivable
 
901

 

 

 
 
901

General and administrative expenses
 
2,005

 

 

 
 
2,005

Depreciation and amortization
 
3,203

 
2,359

(i)
1,852

(i)
 
7,414

Interest expense
 
313

 

 

 
 
313

Total expenses
 
12,194

 
5,917

 
6,448

 
 
24,559

Other income:
 
 
 
 
 
 
 
 
 
Other interest income
 
117

 

 

 
 
117

Gain from extinguishment of debt
 

 

 

 
 

Income from unconsolidated joint venture
 

 

 

 
 

Gain on early payoff of real estate loan receivable
 

 

 

 
 

Total other income
 
117

 

 

 
 
117

(Loss) income from continuing operations
 
(7,799
)
 
113

 
2,120

 
 
(5,566
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
Gain on sale of real estate, net
 

 

 

 
 

Total income from discontinued operations
 

 

 

 
 

Net (loss) income
 
(7,799
)
 
113

 
2,120

 
 
(5,566
)
Net loss attributable to noncontrolling interests
 
218

 

 

 
 
218

Net (loss) income attributable to common stockholders
 
$
(7,581
)
 
$
113

 
$
2,120

 
 
$
(5,348
)
Basic and diluted loss per common share:
 
 
 
 
 
 
 
 
 
Continuing operations
 
(0.66
)
 
 
 
 
 
 
(0.18
)
Discontinued operations
 

 
 
 
 
 
 

Net loss per common share
 
$
(0.66
)
 
 
 
 
 
 
$
(0.18
)
Weighted-average number of common shares outstanding, basic and diluted
 
11,432,823

 
 
 
 
 
 
29,873,250








F-10


KBS STRATEGIC OPPORTUNITY REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011

(a)
Historical financial information derived from KBS SOR’s Annual Report on Form 10-K for the year ended December 31, 2011.
(b)
Represents base rental income (not reflected in the historical statement of operations of KBS SOR), including amortization of above-market lease assets and below-market lease liabilities, for the year ended December 31, 2011. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2011. Above-market lease assets and below-market lease liabilities are amortized over the remaining non-cancelable terms of the respective lease, including any below-market renewal periods.
(c)
The seller of the Bellevue Technology Center entered into an agreement to lease 67,378 rentable square feet as of the date of acquisition. The pro forma adjustment assumes the same lease was entered into on the pro forma acquisition date of January 1, 2011.
(d)
Represents operating cost reimbursements from tenants (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners.
(e)
Represents other operating income from tenants (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners.
(f)
Represents operating expenses (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011, based on historical operations of the previous owners.
(g)
Represents real estate taxes and insurance expense incurred (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011 based on historical operations of the previous owners.
(h)
Represents asset management fees (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011 that would have been due to affiliates of KBS SOR had the asset been acquired on January 1, 2011. With respect to investments in real property, the asset management fee is a monthly fee equal to one-twelfth of 0.75% of the amount paid to acquire the investment. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition expenses related thereto, but excludes acquisition fees payable to KBS SOR’s advisor.
(i)
Represents depreciation and amortization expense (not reflected in the historical statement of operations of KBS SOR) for the year ended December 31, 2011. Depreciation expense on the purchase price of buildings is recognized using the straight-line method and a 39-year life. Depreciation expense on the purchase price of tenant improvements is recognized using the straight-line method over the shorter of the life of the lease or the expected useful life. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease, including any below-market renewal periods.

F-11